Then why is ethanol gas in Iowa 20 cents cheaper than the "real" stuff in Illinois?
transportation costs + taxes
Because it is subsidized by the federal government.
You really need to ask that?
It is the same reason that Strawberries are cheaper in California, and Oranges are cheaper in Florida. Come on!
It also isn't cheaper when you consider it knocks mi/gal down by about 25%.
The price of ethanol would logically be higher further from where it it produced due to logistical costs of transport from where it is made (primarily the Midwest). No matter where it is sold, no matter the purchase price - ethanol production is subsidized by a tax credit to producers of 50 cents a gallon. So, from general revenues to ethanol producers - courtesy of Senators and Representatives from the Midwest, whether you use ethanol blend fuels or not - you're paying for them.