MTBE Prices Responded to Natural Gas Prices
Notes:
- On top of the usual factors impacting gasoline prices, natural gas has had some influence recently. MTBE is an oxygenate used in most of the RFG consumed in the U.S. Generally, it follows gasoline prices and its own supply/demand balance factors.
- But this winter, we saw it respond strongly to natural gas prices. MTBE is made from methanol and isobutylene, which in turn come from methane and butane. Both methane and butane come from natural gas streams. Until this year, the price of natural gas has been so low that it had little effect. But the surge that occurred in December and January pulled MTBE up .
- Keep in mind that about 11% MTBE is used in a gallon of RFG, so a 30 cent increase in MTBE is only about a 3 cent increase in the price of RFG.
- While we look ahead at this summer, natural gas prices should be lower, so we don’t expect natural gas to have the same influence as we saw in December and January.
- However, last summer’s surge reminds us of the volatility tight markets engender. Last summer, MTBE broke away from gasoline as high prices caused refiners to pull back form the spot market and live hand to mouth. There may even have been some exports to Europe, as prices were high there as well. In July, some plant problems kept prices up longer before they finally fell back in line with gasoline.
- As we approach this summer, we expect to enter the summer with low inventories, increasing the chances of volatility. The recent shutdown of the Blue Island refinery in Illinois adds an additional element of uncertainty to that region as we go through the turnaround. We are not comfortable with how this summer is shaping up so far.