desulfurization

When the price of the Tier 3 sulfur credit hit a new high of $3,600 in October 2023, the tradable sulfur credit for gasoline moved from the background to center stage in refining circles. And while credit prices have retreated slightly to about $3,400, they still represent a nearly 10-fold increase over two years and translate to a Tier 3 compliance cost of almost $3/bbl, raising concerns from refiners in a highly competitive market. In today’s RBN blog, we look at how refiners are adapting and the investments that could reduce the cost of compliance. 

The price of the Tier 3 gasoline sulfur credit hit $3,600 in October, up by a factor of 10 since 2022 and roughly in line with the all-time high reached in 2019. The high price of this important credit is a direct indicator of the true cost of compliance with the Environmental Protection Agency’s (EPA) Tier 3 gasoline sulfur standard and has raised some alarm recently in refining and financial circles. In today’s RBN blog, we give some specific examples of how refiners and investment analysts are reacting. 

Senior refining executives were called to Washington, DC, in June, around the time U.S. gas prices hit their high-water mark for the year, as the government sought recommendations about how to increase the supply of gasoline. One suggestion made to Secretary of Energy Jennifer Granholm was to relax sulfur specifications on fuels, including the Tier 3 gasoline sulfur specifications. But what is the connection between those rules and the U.S. refining system’s ability to produce gasoline? In today’s RBN blog, we explain how the Tier 3 rules constrain gasoline supply capacity in the U.S. and discuss ways to break free from those chains.