Ethanol Stays in Gasoline Even If Mandate Ends
by Mario Parker (Bloomberg BusinessWeek) Ethanol, the best-performing energy commodity this year, is cheaper than gasoline, encouraging refiners to use the biofuel even if President Barack Obama’s administration ends a requirement to do so.
A 49 cent-per-gallon discount to gasoline provides companies including Exxon Mobil Corp. and Valero Energy Corp. (VLO) an opportunity to profit by blending the corn-based additive into fuel, while easing prices at the pump for consumers. Marketers may use ethanol as they look for the cheapest way to boost engine performance and reduce pollution.
…“It’s just ingrained in the supply and distribution and it’s having a moderating effect on pump prices,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “As long as they were still allowed to use it, most would. The lower price and just the logistics of taking it out, most would still use it.”
… Gasoline output that includes ethanol increased to 92 percent so far in 2012 from 88 percent last year, according to Energy Department data.
…In addition to meeting the government mandate, it’s combined with gasoline to boost octane, a measure of engine performance, allowing refiners to spend less on the crude-oil refining process, Klesse said.
Alternatives to ethanol for boosting octane include alkylate and toluene. Toluene cost $4.205 a gallon on the U.S. Gulf Coast as of Aug. 17, according to data compiled by Bloomberg. READ MORE and MORE (McClatchy) and MORE (Ethanol Producer Magazine/Renewable Fuels Association)