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Economists: Octane Premium Offsets Ethanol Energy Penalty
by Susanne Retka Schill (Ethanol Producer Magazine) Ethanol critics bash the fuel for its lower energy value than gasoline, while ethanol supporters point to its octane-boosting properties. University of Illinois ag economists Scott Irwin and Darrel Good analyze the value of ethanol in blended gasoline over the past decade based on those components in a recent FarmDoc Daily post, “On the Value of Ethanol in the Gasoline Blend.”
Much of the analysis of the cost of ethanol relative to CBOB has ignored the potential benefit of the octane-enhancing qualities, particularly in the face of the reported retooling of refineries to producer lower-octane base fuels that need to be oxygenated to meet specifications. Many analyses focus only on ethanol’s energy deficit compared to gasoline, the economists point out.
It also looks at the cost of aromatics, the petroleum-based oxygenates used instead of ethanol, and the shift in use from aromatics to ethanol in one state over the past decade.
“As expected, the energy-adjusted price of ethanol (assuming ethanol has only two-thirds the energy value of CBOB) was consistently higher than the price of CBOB by an average of $1.02 per gallon. On the other hand, the price of ethanol was consistently below the price of aromatics, considered as alternative octane enhancers, by an average of $1.06 per gallon.” That calculates to the net value of ethanol, which though just 4 cents per gallon, calculates to “nearly $7 billion over the nine-year period from 2008 through 2016.”
Limitations to the analysis, the authors point out, include other factors not examined that could impact value, such as the value of Reid vapor pressure and the lower energy value of aromatics. “The bottom-line is that a refinery optimization model is needed to conduct a complete analysis of value of ethanol in the gasoline blend. Nonetheless, our analysis points out the partial and misleading nature of work that only focuses on the energy penalty of ethanol and ignores the octane premium.” READ MORE