U.S. Retail Fuel Companies’ Perceptions Regarding the Adoption-Diffusion of Higher Ethanol Fuel Blends

Open Access
Author:
Boden, Jessica Leigh
Graduate Program:
Biorenewable Systems
Degree:
Master of Science
Document Type:
Master Thesis
Date of Defense:
July 02, 2018
Committee Members:
  • Paul Michael Smith, Thesis Advisor
  • Ralph Angelo Oliva, Committee Member
  • Nicole Robitaille Brown, Committee Member
Keywords:
  • E15
  • Unbranded Fuel Companies
  • Branded Fuel Companies
  • Retail Fuel Market
  • Higher Ethanol Fuel Companies
  • Barriers
  • Drivers
  • Market Share
Abstract:
Due to climate change concerns and related greenhouse gas (GHG) emissions from combustion of fossil fuels, the U.S. federal government has established a variety of mechanisms to encourage renewable transportation fuels, such as corn-grain ethanol, into the petro-gasoline transportation fuel supply chain (Vimmerstedt et al., 2012; Anderson, 2012; EPA, 2017; EPA, 2017b; RFA, 2018). In 2017, nearly 16 billion gallons of corn-grain ethanol accounted for approximately 10 percent of the total U.S. transportation fuel supply, but is currently constrained by the maximum 10 percent blend allowed in E10 fuels, referred to as the “blend wall” (Chen et al., 2016; RFA, 2018). To increase the amount of ethanol sold per year, the EPA approved the sale of E15 fuel (10.5-15% corn-grain ethanol and 89.5-85% petro-gasoline) for 2001 and newer light-duty vehicles (Bracmort, 2018; EPA, 2017). However, E15 fuel may be viewed as a competitive threat by the oil refining industry and branded fuel retailers (Al-Falihs, 2017; Dinnenn, 2017) and an emerging market opportunity (Aguilar et al. 2015) for ethanol producers and unbranded fuel retailers (Lorenz, 2018; O’Brian, 2018). As a result, challenges remain regarding the expansion of E15 into the retail fuel industry (Grogan, 2011; Vimmerstedt et al., 2012; NACS, 2014; Lorenz, 2018). This paper explores the ranking of perceived drivers and barriers regarding the adoption and diffusion of E15 into retail fuel companies’ stations through 14 semi-structured interviews with eight unbranded and six branded participants from February to May 2018. Unbranded fuel companies (e.g. 7-Eleven; Cumberland Farms) may purchase their fuel supply from any fuel refiner (Firgo et al., 2015). However, branded fuel companies (e.g. Shell; BP) franchise their brand to independent retailers who are obliged, under contractual agreement, to purchase and sell fuels supplied by the branded refiner at their station(s) (Firgo et al., 2015). This study found a very wide disparity between the perceived drivers and barriers regarding adoption of E15 fuel into retail fuel stations for unbranded and branded participants. In particular, the eight unbranded participants ranked product differentiation the top ranked driver to adopt E15 fuel into their stations, followed by profit incentive, federal government and private incentives, and the RIN market. The six branded participants ranked E15 fuel mandate highest, followed by consumer demand, octane standard, and profit incentive. In terms of barriers to the adoption of E15 fuel into their retail stations, the eight unbranded participants ranked consumer knowledge as the #1 barrier, followed by RVP waiver, infrastructure costs, and dispensing labeling issues. The six branded participants ranked vehicle warranties as the #1 barrier to E15 fuel adoption, followed by infrastructure costs, consumer mis-fueling liability, and space constraints (for additional fuel tanks). Various policies have been implemented to address future concerns of energy independence, energy security, and climate change, which have, consequently, advanced ethanol-blended fuels. As a result, higher ethanol fuel blends are perceived differently between branded fuel retailers (oil companies) and independent unbranded fuel retailers. And, these two fuel retailer groups have reflected market share competition between the oil refining and ethanol industry.