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Octane’s Liquid Diamonds: The Secret Value of Ethanol

Submitted by on January 26, 2016 – 11:50 amNo Comment

by Jim Lane (Biofuels Digest)  Is ethanol really worth $3.81 for the octane but costs only $1.39 on the market? How could that be?  Math majors around the country are frequently perplexed by this one. If you start with 84-octane RBOB gasoline and add a 10 percent blend 100-octane ethanol, how the heck do you get 87-octane gasoline at the pump?

(Don’t you get, in that typical scenario, a 85.6 octane regular unleaded fuel — below the recommended values from many car manufacturers for preventing engine knock?)

The secret is this. It’s not really the measured value of “octane improvers” that matters, when it comes to blending components into a finished fuel. It’s the “blending values of octane improvers”.  Lots of refinery components like FCC gasoline, reformate, alkylate — or, additives like ethanol — can improve octane. “But, measured octane is different than performance octane,” explains Steve VanderGriend of the Urban Air Initiative.

Turns out, the blending value of ethanol is 119-octane, according to Albahri (Dr. Tareq A. Albahri, Center for Petroleum Refining Studies at Kuwait University). That explains how you add so much octane to RBOB gasoline with ethanol.

Which raises the question: how much is that ethanol worth? …  If mandates were to go away, are there other considerations that make ethanol an attractive molecule for refiners?

The background on octane for newer readers

Feedstock costs vary and blends vary, refinery to refinery. In the end, the best way to look at the value of octane in the marketplace is to look at market prices.

To simplify, we’ve used 87, 89 and 91 for regular, mid-grade and premium fuel.

In the US, a step-up of one grade of gasoline (regular to mid-grade, or mid-grade to premium), costs $0.238 this week at retail, according to the US Energy Information Administration. That’s for two points in octane rating.

From that, we can imply a retail value of 11.9 cents per octane point, in today’s market. Ethanol has a 32 point octane blending value advantage over 87-octane gasoline, which gives us a retail value of $3.81 for a gallon of ethanol’s octane, irrespective of mandates.

But the biggest factor is the price of competing refinery products that also supply octane. For example, toluene. Problem is that you have limitations on how much toluene goes safely into gasoline, because of potential carcinogenic effects.


Compared to other octane options, however, ethanol has regulatory compliance value.

When a refiner blends in a gallon of ethanol, as opposed to some other octane enhancer, the blender generates a RIN credit, which can be presented to the EPA as evidence of blending low-carbon renewable fuels as required under RFS, or can be detached and sold into the RIN market.

Chasing engine efficiency

One way to increase the efficiency of the internal combustion engine — and push for higher fuel economy — is by increasing the compression ratio. Problem is, higher compression increases the risks of premature fuel detonation, or knocking. So, high octane has a premium value in any consideration of super-efficient, next-generation engines, One of the reasons that many auto manufacturers are looking into E30 blends as they contemplate the next generation of fuel economy targets.

More background for new readers, on RINs


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