Preliminary Assessment of Spatial Competition in the Market for E85: Presentation Supplement

Anecdotal evidence suggests retail E85 prices may track retail gasoline prices rather than wholesale costs. This indicates E85 prices may be higher than they would be if priced on a cost basis hence limiting adoption by some price-sensitive consumers. Using publicly available and proprietary E85 and regular gasoline price data, we examine pricing behavior in the market for E85. Specifically, we assess the extent to which local retail competition in E85 markets decreases E85 retail prices. Results of econometric analysis suggest that higher levels of retail competition (measured in terms of station density) are associated with lower E85 prices at the pump. While more precise causal estimates may be produced from more comprehensive data, this study is the first to our knowledge that estimates the spatial competition dimension of E85 pricing behavior by firms. This technical report elaborates on a related presentation.