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.
gasoline
Wednesday, 3/15/2023
As the push for decarbonization in the transportation sector gathers momentum, electrofuels — also known as eFuels, which are produced by using electricity to combine the hydrogen molecules from water with the carbon from carbon dioxide (CO2) — are beginning to attract attention as an alternative fuel with three important selling points in today’s environment. First, eFuels are available now and can be made with current technology, although there is a lot of room for future improvements and growth. Second, because they are considered drop-in replacements, they are essentially indistinguishable from the fossil-based conventional fuels in use today, which means they can be used without any changes to the existing energy infrastructure. Third, they can capitalize on a rapidly growing set of hydrogen and CO2 suppliers eager to secure a diversified set of offtakers. In today’s RBN blog, we look at HIF Global’s approach to eFuels production, its demonstration plant in Chile and its big plans for Texas and beyond.
Sunday, 2/19/2023
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.
Monday, 2/13/2023
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 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.
Wednesday, 1/25/2023
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.
Thursday, 1/12/2023
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.
Wednesday, 12/14/2022
It could be argued that no sector in the energy industry has seen more uncertainty the past three years than refining. In rapid succession, it experienced a historic collapse in demand, a shaky recovery, a run-up in crude oil and other feedstock prices, the disruption in Russian supply, and the wrath of the public and politicians alike when gasoline and diesel prices rocketed higher earlier this year. Prices at the pump may have sagged in recent months, but don’t think for a second that refining has reverted to anything resembling stability and normalcy — refiners still face a host of challenges and unknowns. For starters, what’s ahead for crack spreads, which have been spiking up and down lately? How quickly will electric vehicles (EVs) undermine demand for traditional motor fuels? And what about renewable diesel? New environmental regulations? More refinery closures? In today’s RBN blog, we look at the long list of challenges domestic and international refiners will face through the rest of the 2020s.
Thursday, 12/08/2022
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.
Wednesday, 11/30/2022
The Renewable Identification Number, or RIN, market is so misunderstood that even its main participants don’t agree on its financial impact, effectiveness, or even basic fairness. RINs are a feature of the federal Renewable Fuel Standard (RFS), which requires renewable fuels like ethanol and bio-based diesel to be blended into fuels sold in the U.S. And depending on your point of view — trader, farmer, refiner, blender, consumer, politician — you may have a very different perspective about how the system works. In today’s RBN blog, we discuss highlights from our new Drill Down Report that attempts to make sense of the complexities of the RINs market.
Thursday, 11/17/2022
While we’ve seen up-and-down spikes in stock market indices, cryptocurrency values and the prices of crude oil and motor fuel in recent years, the price of one important commodity has been quietly but relentlessly rocketing higher — octane, the primary yardstick of gasoline quality and price. The steady rise in octane prices is tied in part to the fundamental change in how octane is valued, with the retail market now being impacted more by demand than production costs. In today’s RBN blog, we look at why octane prices have climbed over the past decade and what market factors are limiting its supply.
Monday, 11/07/2022
It’s understandable for politicians to want energy markets to bend to their will — especially when it comes to gasoline prices. No one likes spending $60, $70 or $80 to fill up their car, SUV or pickup and, well, drivers are voters. The problem is, there’s no simple way to bring down gas prices, and that puts politicians in a quandary. Faced with public outrage, they feel pressured to respond and, with no easy fix at hand, they strain to develop legislative or regulatory “solutions” that in the end may not solve anything. In today’s RBN blog, we discuss the various efforts in the U.S. and overseas to monkey with market mechanisms and rein in the cost of motor fuel.
Tuesday, 10/04/2022
The swift increases in crude oil and gasoline prices that followed Russia’s invasion of Ukraine in February — and the sanctions that were implemented soon thereafter — spurred a lot of concern that the U.S. and global economies would go into a tailspin. In response, government officials here and abroad turned to their strategic reserves as a way to quickly balance the market and rein in prices while buying time for additional oil production to come online. But U.S. production growth and rig activity have hit a wall since June, when releases from the Strategic Petroleum Reserve (SPR) started to pick up steam, reducing the prospects for a significant output increase this year. In today’s RBN blog, we examine the changes in the market since the major withdrawals were announced, how the hoped-for bridge to higher oil production has so far failed to materialize, and why it’s unlikely the government will turn to the SPR if prices spike again soon.
Monday, 9/19/2022
The high cost of gasoline and diesel and their impact on inflation and the global economy has been a major market development this year, with the blame typically being cast on politicians, oil producers and policies intended to limit development of traditional energy resources and encourage decarbonization — and sometimes all of the above. Prices have retreated in recent weeks amid lower consumer demand and worries about the state of the global economy, but long-term concerns about global refining capacity and the possibility of another price spike remain. In today’s RBN blog, we discuss highlights from our new Drill Down Report on the state of global refining.
Thursday, 9/15/2022
What has been the most controversial topic in the U.S. refining industry over the last 10 years? Well, it’s a matter of opinion but, judging from time spent in earnings conference calls, law offices, courtrooms, congressional committees, the White House, and other forums of business and political debate, Renewable Identification Numbers — or RINs — would have to be a top contender for that prize. In today’s RBN blog and the final episode of this series, we consider two differing viewpoints on the effects of the RIN system and specific disagreements — or are they misunderstandings? — about the financial consequences of RINs that have dominated the debates and legal cases.
Tuesday, 9/13/2022
Refined product markets in the U.S. are constantly morphing. Over time, demand for gasoline and diesel rises or falls, refineries are shut down, and the price spread between products sold in neighboring regions widens or narrows. These changes can incentivize refiners and marketers to push into new areas — and encourage midstream companies to develop pipeline capacity to ease the flow of gasoline, diesel and jet fuel into newly attractive markets. Midstreamers have advanced a number of pipeline projects in the past few months to help move increasing volumes of products west across Texas to the Permian, the Great Plains and into the Rockies. In today’s RBN blog, we discuss these projects and what’s been driving their development.