RBN Energy

At first glance, the Environmental Protection Agency’s (EPA) proposal to facilitate increased sales of E15 — an 85/15 blend of gasoline blendstock and ethanol — by putting it on the same summertime regulatory footing as commonly available E10 in eight Midwest/Great Plains states might seem like a boon to corn farmers and ethanol producers. But as we discuss in today’s RBN blog, there are a number of economic, practical and even psychological barriers to broadened public access to — and use of — E15 that go well beyond the specific regulatory issue the EPA proposal addresses. As a result, as we see it, EPA’s plan is unlikely to boost E15 demand in any meaningful way, at least for now.

Over the next couple of years — and the next couple of decades — global supply/demand dynamics in refined products markets will be driven by two critically important factors. The first is the understandable reluctance of refiners to expand capacity in the face of climate policy and ESG headwinds. The second is a growing gap between policymakers’ aggressive energy-transition goals and the global pivot to a renewed focus on energy security brought about by the Russia-Ukraine war and worries about China’s global ambitions. These factors, which will fuel the prospects for constrained supply and higher-for-longer demand, have far-reaching implications, not only for refinery owners but also for E&Ps, midstreamers, exporters, energy industry investors and policymakers, all of whom need to gain a clearer understanding of what’s just ahead — and what’s over the horizon, just out of sight. In the encore edition of today’s RBN blog, we discuss key findings in “Future of Fuels,” a new, in-depth report by RBN’s Refined Fuels Analytics practice on everything you need to know about U.S. and global supply and demand for gasoline, diesel, jet fuel and biofuels over the short-, medium- and long-term.

If you buy premium gasoline, you’ve probably noticed its price differential versus regular has been increasing in recent years. That is a sign of the rising value of octane, the primary yardstick of gasoline quality and price. In this blog series we’ve examined a new gasoline sulfur specification called Tier 3, which is causing complications for U.S. refiners looking to balance octane and gasoline production while still meeting the regulatory limits on sulfur. In today’s RBN blog, the fourth and final on this topic, we provide an analysis of the obscure Sulfur Credit Averaging, Banking and Trading (ABT) system, which allows refiners to buy credits to stay in compliance with the Tier 3 specs. The price of these credits quintupled in 2022, another sign of a tight octane market that will be attracting increased attention in the months and years ahead.

Since 2019, more than 1.3 MMb/d of U.S. refinery capacity has been either shut down for economic reasons or converted to renewable diesel production. The decline in the nation’s ability to produce gasoline and diesel hampered the refining sector’s response to the post-COVID demand recovery and exacerbated the big run-up in motor fuel prices that followed Russia’s invasion of Ukraine last February. Now, there may be a new threat to U.S. refining, namely the possibility that a proposed Environmental Protection Agency (EPA) rule on hydrofluoric-acid-based alkylation could, over time, spur an even larger round of refinery closures. In today’s RBN blog, we continue our look at alkylate — a critically important part of the U.S. gasoline pool — the prospective regulation and its possible effects.

Well, you might say energy markets got smacked upside the head in 2022. After a decade of energy abundance, a meltdown in demand in 2020, and what looked like a budding recovery in 2021, energy security had devolved into a back-burner issue. After all, why worry about existing fuel sources when they would soon be replaced by waves of renewable and sustainable fuels? Then, literally overnight, the world changed on February 24, when Russia invaded Ukraine. Prior assumptions about energy security were out the window. Suddenly, the availability, source of production and, of course, the price of traditional energy were front-and-center. In fact, those priorities swiftly overshadowed energy-transition goals. We could see that shift in focus every day at RBN by monitoring the website hit rate of our blogs to see which ones garnered the most interest. This year, all of the top blogs were in some way tied to energy security. So today we dive into our Top 10 blogs based on the number of rbnenergy.com website hits to see how energy security has permeated all aspects of energy markets.

A potentially important factor affecting the supply of octane — the primary yardstick of gasoline quality and price — has been lurking in the background over the last few years. The Environmental Protection Agency’s (EPA) Tier 3 gasoline sulfur standard applies to all refiners and importers who deliver gasoline to the U.S. market, and while delayed compliance requirements and the onset of the pandemic have blunted its full impact to refiners and consumers so far, the implications of meeting the new standard are beginning to take shape. In today’s RBN blog, we explain how the Tier 3 specs are linked to octane supply, where octane destruction comes into play, and how refiners are adapting to the octane-sulfur squeeze.