1. Autos
Send to a Friend via Email
You can opt-out at any time. Please refer to our privacy policy for contact information.

Fuel or Fool?

A Look at the Cost Factors that Affect Alternative Fuels

By

Biofuel fuel pumps

A set of biofuel pumps. E85 (for flex-fuels) is on the left, biodiesel (for diesels) on the right.

photo © Scott Gable

In general, alternative fuels do tend to be less expensive than gasoline and petroleum diesel fuel. Both natural gas and propane track below the retail price of diesel and gasoline. And in our geographic location in southcentral PA, ethanol-based E85 usually tracks about 60 to 70 cents per gallon less than gasoline. The stations that sell biodiesel in our area are selling a B5 blend that’s often priced the same (and sometimes less) than the regular diesel stations. There really are many factors involved in fuel pricing. First, let’s take a look at biodiesel.

Biodiesel

The widely used term biodiesel doesn’t necessarily mean it’s 100 percent biodiesel—-in fact, most fueling stations sell blends of B5, B10 and B20, with fewer selling B100, straight biodiesel. So first and foremost, it’s best to confirm the biodiesel fuel blend at a given price. The price of these biodiesel blends will be affected by the amounts of each fuel contained in them, plus the percentage of the blend will be affected by the markets for either petroleum diesel or the feedstock for the biofuel portion. Spikes in the cost of agricultural products can greatly affect the cost of producing biodiesel, as well as spikes in the price of the world supply of crude oil that can affect petroleum diesel fuel prices.

Biodiesel prices also depend upon seasonal availability, but factors involved in growing, processing and distributing it can contribute to frequent price fluctuations, sometimes pushing the price higher than regular diesel. Another factor that affects the price of biodiesel, independent of the crude oil market, is economies of scale. As more biodiesel producers come online, it should naturally follow that this will heat up the competition and also increase the available supply that should soften prices.

Of course, making your own homebrew biodiesel is definitely a more economical option—it can ring in at less than one dollar per gallon. But this does require labor (yours!) and time management and discipline, plus a good supply of oil, naturally. It’s certainly not for everyone.

Economical Electricity

Electricity to power electric vehicles—especially if they are charged during off-peak hours—can be the least expensive alternative fuel of all. Gasoline hybrid vehicles actually generate electricity while driving—yes, when coasting, hybrids make their own electricity through regenerative braking. And that’s essentially free electricity equaling extended fuel mileage. And when the plug-in hybrid vehicles hit the markets, look out. Not only cleaner and more efficient, plug-in hybrids will make pumping those electrons look mighty attractive when compared to liquid fuels.

Geopolitics & Government Intervention

Realize that geopolitics does affect the supply and hence the price of crude oil. Furthermore, domestic political considerations affect the price of agricultural feedstock. These conditions are often not well understood and even more difficult to control, but they leverage huge sway over the availability and cost of resources.

In a nutshell, American consumers are used to inexpensive energy. Much of the oil industry is heavily subsidized by the federal government—yes, paid for with tax dollars—making that so-called “cheap fuel” artificially inexpensive. Alternative fuels, especially biofuels, have not benefited from the same government subsidies, so they have borne the true cost of development and processing. In much of the world, European nations especially, folks pay substantially more than Americans for fuel. Perhaps globalization has something to do with this, but certainly geopolitics, and maybe even demographics are helping this all to equalize.

But is it a rip-off?

“Is the public really getting ripped off?” we’ve been asked. Well, that’s a matter of perception, but we don’t believe that’s really so. When you think about it, biodiesel, ethanol, compressed natural gas, propane—even electricity—are all fuels that deliver what they promise. Power. And cleaner power it is.

Wouldn’t a rip-off be something that’s hyped up but doesn’t deliver? In our experience, all the alt fuels we’ve used are up to par: cleaner and fully functional, they’re helping to wean a dependent world slowly off petroleum, and by extension, offering cleaner emissions, slashing greenhouse gases, and extending the range of the petroleum reserves that remain. And best of all, when you buy alt fuels and hybrids, you’re casting a strong vote by supporting businesses that are taking vital steps to make the world a better place for today and for future generations.

Read more about how alt fuels make a difference and why making the switch is easier than you think.

©2014 About.com. All rights reserved.