Depending on the scenario, one industry official said, the increased demand could drive the pump price for regular 87 octane gasoline 30 to 52 cents higher per gallon than ethanol-blended fuel.
The fuels association sees Magellan's switch as a potential boost for ethanol.
Monte Shaw, the organization's executive director, is urging Iowa gasoline retailers to consider selling 89 octane E15 gasoline — which is 15 percent ethanol — in addition to E10 ethanol that already is widely sold. He believes E15 gas could sell for about a nickel per gallon less than E10 gas and would be a good second option for gas stations with just two gas tanks. E15 is approved only for 2001 model year and later vehicles.
"Getting to this next level of ethanol blend would be a big sponge for corn" sales and a boon to Iowa's agricultural economy, Shaw said.
Only a sliver of Iowa gasoline sales now involve E15 fuel, but if the ethanol-blended product were sold on a widespread basis here it could be a model for the rest of the nation, he added.
Other parts of the country have already made the change from 87 octane to lower octane gasoline for various reasons, and Shaw expects other Iowa pipeline operators to follow suit after Magellan's product shift.
Iowa gasoline retailers said last week they weren't sure yet how the upcoming changes will affect gasoline prices.
"Every day could be different because you are dealing with a commodity that is traded 24 hours a day. . We are out there scouring trying to find the cheapest price that we possibly can," said Mike Thornbrugh, government and public affairs manager for Tulsa-based QuikTrip, which has 20 stores in the Des Moines area.
Information from: The Des Moines Register, http://www.desmoinesregister.com