I've noticed the same kinds of drop in mileage with E10, and I try to avoid it when possible, I also notice that at least a year or so ago when in MN, that the BP gas stations sold premeum that was 100% gas, and was labled as being ment for only older cars, motorcycles, lawn mowers, and cars that can't handled ethonal.
besides the higher then 10% drop in mileage with a 10% alcohol content in the fuel, I also don't like like it because when corn is mono croped (as almost all corn is) it causes horble soil erosoin, and depletion of nutrents, causing farmers who are looking for a few more pennies, to start spraying more and more, poisioning our ground water, and rivers.
Alcohol engines are closer in design to a gasoline engine, then say a Diesel engine, but alcohol engines are enginered to run at their peek on alcohol, not gasoline, same with gasoline engines, they are not designed to run at their peek on alcohol, sure you can mix small amounts of diesel, or alcohol, or water in with your gas, and run it in your gasoline engine, but it will not run at it's designed peek efficentcy, I think Saab overcame this with a variable presure set up on a turbo, so they could very the affective compression ratio of the engine to run on either gas, or alcohol, but so far that is the only one that I have heard of.
I really think it's a bad idea that we are burning more gasoline because of the alcohol in the fuel, I've heard of people who have their mileage drop by as much as 20% with E10, so if I took a gallon of gasonline, and added 1/10 of a gallon of ethonal to it that gallon of gas will not take you as far.
As other guys pointed out:
To proper utilize E10 you have to adjust your timing(forward).
Higher octane fuels generally burn slower / than normal gas
Higher octane does not equal more power.
Octane rating just says how stable is the fuel when compressed before it self ignites.
What typically happens in the engine is that fuel mixture come in the combustion chamber it gets compressed and ignited.
Then comes the difference-while it burns slower the exaust valves open
and it is being pushed out by the piston while still burning.
Meaning that the fuel mixture has not yet gave 100% of its power to the engine,resulting in some loss of power and hurting FE.
The point of advancing the ignition is to give the mixture more time to burn
completely (before the exhaust valves open) by igniting it earlyer.
From the outside, I would also agree that a 12%+ drop looks 'fishy', but I ran the E10 for 2 weeks, which is 2 tanks full.
I drive the same route, and employed the same driving techinques that got me to 47.14 with regular unleaded. Enviornmental conditions were the same, in terms of weather, a/c use, etc.
I have hence had 2 weeks back on the unleaded, and my mileage bounced right back.
I use syn oil, changed every 10,000 miles. I am mid way in an oil change. I change the air filter every 2 oil changes. I check air pressure in tires every Sunday, and make sure they are 44 psi. I change spark plugs every 30,000, and use Bosh platnium 4's. I really don't believe there is any radical variability. If there were, my mileage would not have rebounded when I went back to unleaded.