Advanced BioFuels USA

A nationwide E30 Clean Octane standard

This  triggered a few thoughts about how our petroleum refinery friends should be giving some serious thought as to why they should be at minimum receptive to—if not outright supportive of—a gradual transition to a nationwide E30 Clean Octane standard which would, like RFS1 and RFS2, see ethanol blends phase-in as production increases and new dispensers are installed  from E15 to E20 to E25 to E30 nationwide ten or so years from now.  This is a vision laid out in the Next Generation Fuels Act that Senators Grassley and Duckworth introduced in the Senate and more than 20 members have sponsored in the House.    Of course, there will be localized markets like what we are already seeing in South Dakota, Nebraska, and Kansas that will move quickly to E30 in the near-term, in the process improving local ethanol plants’ netbacks due to reduced transportation costs and higher ethanol values.

Near-term Ethanol Price Support?  US gasoline crack spreads today stand at $26/barrel.  US refinery capacity has declined considerably, and that which remains has been operating at unsustainably high capacity.  Turnarounds this spring should put upward pressure on ethanol prices in the near-term as refiners look for both supply extension and octane boosting support.  Gulf Coast exposure to hurricanes and other severe weather interruptions will only make gasoline/diesel shortages more frequent and more costly, especially for hard-hit consumers at the pump. 

Transition to E30 Will Not Necessitate Refinery Operational Adjustments.  Transitioning from today’s nationwide E10 to tomorrow’s nationwide E30 will on balance make petroleum refiners’ lives easier, not harder.  Operationally, they will continue to use the same crude oil slates and run the same configurations—except for turning down their high severity reformers as they reduce their need for BTEX/aromatics.  As the MathPro – GM/Ford linear program analysis confirms, as crude oil prices advance, reducing reformer use will actually save them money.  It should also increase their output of distillate/diesel, jet fuels, and other petroleum products to increase exports that will benefit their bottom line.

Refinery Emissions Will Be Substantially Reduced.  The MathPro LP study also confirmed that refiners would substantially reduce their CO2 and toxics/VOC emissions which will be increasingly important as EPA cracks down on stationary source carbon and toxics emissions.

Increased Use of Light Tight Oil Will Continue to Put Upward Pressure on Ethanol’s Higher Octane Value.  US refiners are using more of what is termed as Light Tight Oil which yields lower octane crude feedstocks. Enter ethanol to the rescue, providing the lowest carbon, lowest price, most bang for the buck octane available anywhere.

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