How a Plan to Boost Ethanol Would Reverberate Across the US

by Jennifer A. Dlouhy (Bloomberg/Washington Post) … There is no ethanol in raw gasoline, known as blendstock; oxygen additives are incorporated later, right before retail sale. To ensure E10 sold in those Midwest states has a lower volatility and can meet the summertime limits, the blendstock itself would have to be less evaporative, too. In practice, the RVP of that unblended gasoline would be low enough so that when ethanol is added to it, the finished fuel — whether E15 or E10 — satisfies the requirements. One way for refiners to reduce the volatility of blendstock is to add less butane, a cheap hydrocarbon used to lower the cost of gasoline.

4. What would those ripple effects include?

To satisfy the new demands of Midwest states along with existing requirements elsewhere in the US, refiners would need to construct storage tanks and other infrastructure to keep different blends segregated. The Midwest could find itself more dependent on a smaller subset of refiners and therefore more vulnerable to supply disruptions when those facilities undergo maintenance or outages. (The EPA can waive fuel requirements — including volatility — under emergencies.) Pipelines that currently specify the grades of fuel they carry would need to make modifications and add new equipment. And filling stations that choose to offer E15 might have to upgrade or replace existing tanks, pumps and other gear to dispense the fuel.

5. How would gasoline prices be affected?

In the short term, prices for E10 would almost certainly increase as infrastructure changes are passed on to consumers. One estimate sees prices rising by at least 2 cents per gallon in the affected states. But the extra cost could be more than offset for motorists choosing cheaper E15. When the EPA issued emergency waivers allowing summer sales of E15 in 2022, it sold for nearly $1-per-gallon less than E10 in some areas, with a nationwide average discount of 16 cents per gallon, according to an industry-commissioned analysis. Over time, additional E15 sales could contribute to a gradual reduction in US demand for petroleum, potentially helping to lower consumer costs, especially during oil supply squeezes like the one that caused gasoline to surge last summer.

6. When might all this happen?

The EPA is considering the governors’ request and is expected to ask soon for public comment on the issue. Ultimately, the agency has little discretion under federal law to deny the change, though it can postpone the shift for at least a year, and extend the delay by two more years, if it concludes there is insufficient gasoline supply. Refiners and pipeline operators have pleaded with the EPA for more time to adapt, arguing it will take two years to get necessary infrastructure permitted and built.

7. Will this actually result in more ethanol sales?

Eventually. The current summertime restrictions are a headache for filling-station owners that sell E15 because it forces them to change out labels and tanks to accommodate the seasonal timeout. If that burden is lifted, then those stations will be able to sell E15 year-round — and competitors may follow suit. Ethanol is authorized for use in 96% of cars and light trucks on the road (those built in 2001 and later). But some consumers might be wary; though E15 is cheaper than E10, it also contains less energy — so motorists can’t travel as far on a gallon of it. READ MORE Original on Bloomberg

Midwest US Ethanol Push Seen Lifting Gasoline Costs by up to 12 Cents a Gallon (Bloomberg)

Excerpt from Bloomberg: The study, conducted by Baker & O’Brien Inc. for the main US refining trade group, predicts it would cost as much as 12 cents more per gallon to distribute, store and produce a new fuel to adapt with the move, which is part of a bid to encourage filling stations to sell higher ethanol E15 gasoline and offer it year round. That’s in stark contrast to a previous estimate commissioned by advocates of corn-based ethanol that saw only a 2-cents per gallon increase for consumers.

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At issue is a push by some Midwestern governors to stop giving conventional E10 gasoline a partial waiver from volatility limits meant to curb air pollution. That would put E10 and E15 on the same regulatory footing in their states — and potentially encourage more sales of the higher-ethanol variety. But to meet the EPA requirements, refineries would have to churn out raw, unblended gasoline that is less volatile, essentially creating a boutique fuel for the affected Midwest states. And that, in turn, would prompt a slew of changes across the fuel supply chain, beginning at the refineries forced to forgo using butane and other inexpensive, evaporation-prone gasoline components that make the fuel too volatile.

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Refineries typically would need to invest between $50 million and $75 million each to make necessary improvements, such as installing more storage tanks to hold those especially evaporative gasoline ingredients, according to a summary of the analysis that was commissioned by the American Fuel and Petrochemical Manufacturers trade group.

Costs could reach $500 million to $800 million in the first year alone, and potentially be higher if there are disruptions, said Patrick Kelly, senior director of fuels and vehicle policy at the association. “Requiring the manufacture of an entirely new gasoline blend for the Midwest is going to come with a massive price tag,” Kelly said.

The full study, which factored in facility-specific data to create a robust picture of potential impacts, was not made available for review.

It’s not clear that all refineries would make the necessary investments; some could pivot to produce fuel for other states instead. It’s also not certain how many extra expenses would be passed on to consumers. The study found there would be additional near-term costs of 8 cents to 12 cents per gallon to make a new gasoline blend for the region and move it to retail locations, while facilities are still installing new equipment and adapting to the change.

Fuel production in the affected Midwest states would likely fall in the near term, as refineries without enough tanks to store butane and other foregone components curtail the amount of crude they process. Overall, gasoline production from refineries supplying the region would shrink about 125,000 barrels per day, the study found. That amounts to nearly 5% of demand in the region and would be akin to a large refinery going offline during the summer. Diesel production would fall an estimated 33,000 barrels per day.

Biofuel advocates who support the change have stressed that consumers could expect greater access to cheaper E15, potentially more than offsetting extra costs, as more stations opt to offer the blend. When the EPA issued emergency waivers allowing summer sales of E15 in 2022, it cost nearly $1-per-gallon less than E10 in some areas, with a nationwide average discount of 16 cents per gallon, according to a biofuel industry-commissioned analysis. READ MORE

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