1	Ethanol, Gasoline, and ULSD Supply Issues in 2006 State Heating Oil and Propane Conference August 2006 John Hackworth Joanne Shore Energy Information Administration
2	Overview MTBE to Ethanol Shift Challenges Progress to date Gasoline Supply Issues Refinery limitations MTBE to ethanol issues Import changes ULSD Supply Implementation so far Areas to watch
3	MTBE Elimination: Northeast & Texas
4	Eliminating MTBE and Replacing with Ethanol MTBE mainly used in RFG (11.4% volume per gallon) Both MTBE and ethanol have good octane and are clean Issue is ethanol relative to MTBE. Ethanol has: Higher blending RVP (VOCs problem) Higher toxics (MSAT issue) Higher affinity for water, which means shipping separately from petroleum and blending at terminals
5	VOCs: Summer Gasoline Capability Loss When Switching from MTBE to Ethanol RFG Outside of CA – net 5-6% loss Lose 11% MTBE Gain 10% ethanol Lose 5% light ends to compensate for ethanol’s increased RVP CARB RFG – net 10% loss Lose 11% MTBE Gain 6% ethanol Lose 5% light ends to compensate for ethanol’s increase RVP May also need small additional volume to compensate for lower energy of ethanol vs. MTBE Longer term, refiners will make changes to compensate
6	MTBE Bans Increased Ethanol Use
7	Use of Ethanol-Blended Gasoline Increased in May as Industry Eliminated MTBE
8	RFG Gasoline in 2006 MTBE being eliminated and replaced with ethanol About 130 KB/D of additional ethanol needed to replace MTBE Added ethanol not all available from domestic production Move ethanol from E10 sold in conventional gasoline markets and use in RFG More ethanol imports? May reduce RFG ethanol blend from 10% to 5.7% for a time Ethanol distribution & terminal preparation challenges Shift in RBOB supply to East Coast (Less East Coast production, more from Gulf Coast and imports) RFG v. conventional gasoline differentials could be high – possible price surges
9	“Room” for 400 KB/D of Ethanol
10	Ethanol Production Increasing
11	Historical Ethanol Imports
12	Ethanol Generally Follows Gasoline
13	Gasoline Supply Issues Lower utilization and higher imports Focus on East Coast markets Transition to ethanol Imports (sources and volumes to meet demand) Regional prices and implications
14	Utilization Patterns Reflect Maintenance & Hurricanes
15	Total Gasoline Imports Year-to-Date Jan-May
16	Europe’s Diesel Use Exceeds Gasoline, & Gasoline Demand is Falling
17	Europe’s Excess Gasoline Supply Is Growing
18	Europe’s Domestic Light Product Supply Imbalance Grown Strongly since 1998
19	U.S. Imports Growing and Blending Component Share Increasing
20	Largest Gasoline Suppliers to U.S. (Thousand Barrels Per Day)
21	U.S. Is Becoming More Important Destination for UK and Netherlands
22	New York’s Recent Prolonged Discount to Gulf Coast Prices
23	RBOB Showing Extra Strength in 2006
24	Ultra-Low Sulfur Diesel (ULSD) Few basics Production so far Things to watch Info website: www.clean-diesel.org
25	Clean Fuel Quality Requirements & Supply Gasoline Low sulfur requirements MTBE elimination Import impacts Ultra-Low Sulfur Diesel (ULSD) ULSD requirements (trending to all USLD) ULSD implementation Implications for other distillate fuels
26	ULSD Phase In Summary
27	As ULSD Requirements Grow, Non-ULSD Pool Shrinks & Production Issues Grow
28	ULSD Production Is Progressing Rapidly
29	Diesel Production June 2005 vs Last Week June 2006
30	Number of Refineries Producing Diesel By Sulfur Level
31	ULSD Summary Refinery production began in June. Refiners should average 80% for June through December. Issues to watch Distribution and contamination – next presentation Kerosene/jet and winter diesel blending Import availability State interest in limiting heating oil sulfur content
32	Wrap Up: Year of Record Fuel Prices Record crude oil prices High refinery limitations – hurricane and maintenance Two difficult fuel specification changes – MTBE to ethanol and ULSD