Illinois gas prices likely to rise after state budget strips tax exemption on ethanol

Posted: Jul 24, 2017 11:48 AM

An advocate for gasoline wholesalers says they’ve been betrayed by the newest Illinois budget and could see a shift away from ethanol-mixed fuel because of it.

E10 gasoline, which is regular gas with ten percent ethanol blended in, has had a 20 percent tax exemption at the wholesale level since 2011. The budget passed by lawmakers earlier this month removed that discount that would have been up for renewal in 2018, which industry experts say will likely result in an increase of between 7-10 cents per gallon at the pump.

Bill Fleischli, Executive Vice President of the Illinois Petroleum Marketers Association, said his members could stop using the E10 gas if straight fuel gets cheap enough.

“There will probably be a movement to bring straight gasoline back into the state,” he said. “If that happens, it will hurt the sale of ethanol, in turn, hurting farmers.”

But Patrick DeHaan, senior analyst with, said the wholesalers aren’t likely to drop ethanol since federal renewable fuel standard laws require a minimum amount of the corn-based combustible to be sold.

“I don’t really expect a shift at all,” he said. “Stations are still incentivized to sell ethanol.”

Fleischli disagrees, saying his members will ship straight gas in if it’s cheap enough. The fuel producer would simply buy ethanol credits to offset the federal penalty.

“Our members know the cost of every penny,” he said.

Fortunately for Illinois stations near the eastern border, Indiana also raised their fuel tax in July and are likely to see an increase in the price there as well.