No, you’re not seeing double. The 10 percent ethanol blend price is now the same as regular gasoline at some Iowa convenience stores.

The small price break that Iowans typically got for choosing E10 at the pumps is evaporating as soaring national demand drives up the cost of the corn-derived additive, and a few local stores last week began pricing E10 higher than regular gas.

The price of ethanol reached $4.50 a gallon last week on the spot market – a 65 percent increase since May – due in part to skyrocketing demand as retailers on the East Coast scramble to replace MTBE as an additive. In response, some retailers decided to raise their prices, said Dawn Carlson, president of the Petroleum Marketers and Convenience Stores of Iowa

“They’ve all have been all sucking it up for months, and they’ve just reached a point where they can’t do it anymore,” she said.

Under a law passed in 2001 by the Iowa Legislature, retailers in the state receive a 2.5 cent per gallon tax break on every gallon of E10 sold that surpasses 60 percent of total sales.

“What that law did was to encourage retailers to sell ethanol at a lower price by passing that along to the consumer,” said Mindy Larsen Poldberg, director of government relations for the Iowa Corn Growers Association. “Iowans have been lucky to get a premium product at a reduced price, and we hope to return to that soon in the future.”

Last year Congress ended the mandate for methyl tertiary butyl ether, or MTBE, to be added to gasoline to address groundwater contamination concerns over use of the additive. However, the energy bill passed included new mandates for the use of ethanol by refiners.

E10’s market share in Iowa peaked last year at 77 percent, and in 2005 averaged 75 percent, Poldberg said.

“If it’s priced even [with regular], consumers may choose E10 for the higher octane,” she said. “But if it goes above the price of regular, I would expect that the share of sales would drop below 75 percent.”

One analyst quoted in The Wall Street Journal on June 19 estimated regular gas would be selling at $2.40 per gallon without ethanol’s influence on the price. Experts say the use of ethanol will eventually help lower gas prices, but there will be transition costs in the short term.

Approximately 80 percent of ethanol that’s purchased by retailers is bought through long-term contracts, so “everyone’s trying to pull on that 20 percent,” Poldberg said. Retailers that haven’t locked in long-term contracts will be the most affected by the price spike, she said.

Poldberg said her association believes the supply-demand imbalance will be corrected as more ethanol plants continue to be built and begin production.

“The reasons for using ethanol are beyond that it’s the lower price,” she said. “We believe it’s good for clean air for Iowa, it’s a renewable source of energy grown here in Iowa that contributes to the Iowa economy. We would hope that consumers would stick with ethanol during this difficult period of pricing.”