Ethanol-Free Fuel Will Cost More, May Be Scarce

by Richard Piersol (Lincoln Journal-Star) Demand for renewable credits helps change market
Prices of premium and regular grades of gasoline without ethanol are likely to rise in Nebraska and Iowa, and those fuels may become harder to find as oil refiners and fuel blenders driven by self-interest and the federal Renewable Fuel Standards lower the octane of the basic product they deliver to terminals in the region.
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"Any predictions about dramatic price increases for premium fuel at the retail level are purely speculation," said Rose White, spokeswoman for AAA Nebraska. "We will likely see some increase for premium fuel if the demand increases."
There could be shortages of premium gasoline, difficulty finding stations with gas not blended with ethanol and a wider spread between blended and unblended, according to some surveys of the industry.
Prices of ethanol blends aren't expected to spike.
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Pipeline company Magellan Midstream Partners confirmed it would stop delivering 87-octane regular-grade gasoline to terminals in Lincoln, Doniphan and Omaha by mid-September and would deliver 84-octane "V-grade" regular instead. Phillips 66, too, confirmed it would have 84-octane at its Lincoln terminal, as NuStar Energy will at its four terminals.
The introduction of "sub-octane" 84 here continues the growing adoption of ethanol in the overall U.S. gasoline pool, according to Platt's, an oil industry publication. The Midwest is the last of the regions in the United States to offer sub-octane.
To reach Nebraska's minimum legal octane of 87 east of the 100th meridian, distributors or retailers will have to raise 84 octane by adding ethanol or premium-grade gasoline.
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Magellan plans to offer gas to retailers at 87, 89 and 91 octane at its terminals, with or without ethanol, said spokesman Bruce Heine. Magellan's refined products pipeline system runs from Houston through northern Minnesota, with a major injection point in Tulsa, Okla.
Heine said the Magellan pipeline ships, but doesn't own, the product. He said the decision on what to offer was driven by customers, who are refiners, petroleum traders and marketers, a term the industry uses to refer to retailers. They want greater flexibility to mix products and more uniformity across states, he said. Allowing them to blend their own mixtures also increases efficiency and reduces the risk of a shortage, he said.
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A new study commissioned by the Iowa Renewable Fuels Association estimates the wholesale cost of the blended regular 87-octane gasoline without ethanol will be 30 cents a gallon more than ethanol-blended fuel after the change.
One unidentified industry official told The Associated Press the increased demand could drive the pump price for regular 87-octane gasoline 30 to 52 cents higher per gallon than ethanol-blended fuel.
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More than 95 percent of gas sold nationwide is 10 percent ethanol, said Michael Green, a national spokesman for AAA.
“Most consumers already use ethanol fuel blends," AAA's White said in a statement. "They will not be impacted by this change. ..." READ MORE and MORE and MORE (DomesticFuel.com) and MORE (Omaha.com) Download study

Excerpt from second Lincoln Journal Star article: ... Rose White, spokeswoman for AAA Nebraska, said it remains to be seen how expensive 87 octane fuel might become if it’s made by blending 84 octane and premium-grade gas.
White noted that the premium contribution represents only 10 percent of the fuel mixture, but Johansen of E Energy Adams said it takes a 50-50 mix of 84 octane and premium grade to get the octane rating to 87.
“So, depending on the market,” he said, “we could see a 15-25 cent difference,” in price between 87 octane gasoline and an 87 octane blend made by mixing in premium grade.
Whatever happens, DeHaan said, “motorists are going to set the market.”
“(But) I think motorists want cheaper fuel prices and I think the corn lobby wants ethanol to be consumed, so it’s hard to push against that.”
Jim Stark of Omaha-based Green Plains Renewable Energy, owner of Nebraska ethanol plants at Ord, Central City and Atkinson, said making a blended 87 octane product with ethanol could offer consumers a price break from regular unleaded.
“What we hope to see,” Stark said, “is a lesser-priced 87.” READ MORE and MORE (DomesticFuel.com) and MORE (Ethanol Producer Magazine)