We are rapidly approaching September 15, when summer blend motor gasoline changes over to winter blend, allowing the increased use of high vapor pressure normal butane in the blending. However, the spread between Reformulated Blendstock for Oxygenate Blending (RBOB, the benchmark unleaded gasoline) and normal butane was down to 85 cents/gal as of the end of August, reducing the incentive to blend as much butane into motor gasoline as possible to its lowest level in recent years. Sure, 85 cents/gal is still 85 cents. But what impact might that smaller RBOB/normal butane spread and other market factors have on butane exports? Today we examine the state of the gasoline blending and normal butane markets, and the effect that current dynamics –– a gasoline glut and strong butane prices among them –– may have.
Let’s begin our look at winter blending of motor gasoline, the RBOB/normal butane spread, and butane exports with a review of the physical performance limitations to the amount of butane that can be blended into motor gasoline and the regulations that govern the practice of blending. There are two primary boundaries regarding normal butane related to engine performance: (1) in the summer, too much butane in the gasoline can cause flashing (vaporization) in the fuel lines and as a result prevent the fuel pump from sending gasoline to the engine (a.k.a. vapor lock); and (2) on cold winter days and nights, insufficient levels of butane in the gasoline can cause the engine to have difficulty starting, since vaporized gasoline is needed for initial combustion.
But there is much more to the practice of butane blending than its impact on engine performance. The Environmental Protection Agency (EPA) administers the Clean Air Act. To reduce auto emissions, particularly in "non-attainment” (e.g., more polluted) areas, EPA has implemented gasoline volatility regulations that establish maximum allowable Reid Vapor Pressure (RVP) levels for gasoline during the summer months. (For more details on butane blending and Reid Vapor Pressure limitations see Wasted Away In Butane Blendingville and Regulatory Gas Pressure Party – R*VP Today!) The EPA has set forth a regulation period, running from May 1 to September 15 each year, in which allowed butane blending into gasoline is minimal due to butane’s high vapor pressure. Depending on the state and the month, gasoline RVP may not exceed a mandated maximum (typically between 7.8 to 9.0 psi, or pounds per square inch) during the summer ozone season. (EPA provides a 1.0 psi RVP allowance for gasoline containing ethanol at 9 to 10% by volume.) At the end of the regulated summer ozone season (September 15), the RVP specs change. For example, the allowed RVP might increase from 9.0 to 11.5, thereby permitting considerably more normal butane to be added.
Now on to the volumes of normal butane blended into the motor gasoline pool. Figure 1 below depicts the U.S. Net Refinery and Blender Normal Butane Surplus period (when the red line is above the green line) and Deficit period (when the red line is below the green line), as reported by the Energy Information Administration (EIA).