Ethanol is Free

This weekend, while traveling through Nebraska, I found an interesting anomaly. At a Caseys filling station, both E10($2.60/gallon) and standard($3.00/gallon) were available. E10 is a blend of 10% ethanol with 90% gasoline. While calculating the cost of ethanol(denoted e) by removing the cost of gasoline(denoted g) from E10, an interesting thing happens. We can model the costs like so:

• g = 3.00
• .10 * e + .90 * g = 2.60

Solving for e

• .10 * e + 2.70 = 2.60
• .10 * e = -.10
• e = -1.00

This means that the ethanol in E10 must cost about $-1.00/gallon compared to standard gasoline.