Why is "silver" gas cheaper than regular grade gas in Iowa?

Question:
I live in Illinois and regular is the cheapest follwed by silver and ultimate. But in Iowa its silver, regular, then ultimate. Why is that?

Answers:

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Ethanol is added to raise the octane of fuel. Ethanol is not taxed in Iowa at the same rate as gasoline. Therefore, when the octane rating (which accounts for the "silver" designation) is higher because of the addition of ethanol, there is less tax than regular gas which doesn't have ethanol added. So, you'll find that there's a few cents difference in the price/gal. between "gasohol" and regular gas.

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I don't know how much detail you want on this subject but here's some more info if you're interested. Gasoline tax in Iowa is .22/gal. Other taxes include 1 cpg UST fee. Iowa tax on gasoline is based on percentage of ethanol sales compared to total motor fuel [gasoline] sold. Tax on regular gasoline increased on 7/1/06 from 20.7 cpg to 21.0 cpg, until 6/30/07. Rate is based on the percentage of ethanol blended fuel sold during the previous calendar year. The tax on ethanol blend of 10 % is 19 cpg and the tax on E85 is 17 cpg.

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Gasoline tax in Illinois is 37.4c/gal. Other taxes include 6.25% sales tax and $0.003 per gallon tax for underground storage tank fund, and other local sales and gasoline taxes.

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I believe it has to do with many of the farmers producing corn for ethanol production. I lived in Nebraska for several years, and they were all about pushing E-85 and ethanol blended fuels.

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