Motor Gasoline Outlook and State MTBE Bans
April 1, 2003
Summary
The U.S. is beginning the summer 2003 driving season with lower gasoline inventories and higher prices than last year. Recovery from this tight gasoline market could be made more difficult by impending State bans on the blending of methyl tertiary butyl ether (MTBE) into gasoline that are scheduled to begin later this year.
Three impending State bans on MTBE blending could significantly affect gasoline markets this year. The Connecticut ban takes effect on Oct. 1, 2003, while California and New York bans follow on Jan. 1, 2004 (Connecticut may delay its ban until Jan. 1, 2004). It is the California ban that presents the most immediate concern. Because the original date of the California ban was Jan. 1, 2003, several California refiners are phasing out MTBE in favor of ethanol in advance of the new deadline. Once facilities and systems have switched from MTBE to ethanol it is generally not possible to quickly revert back. This paper reviews the supply and price issues relating to MTBE bans with a particular focus on California.
Several years ago MTBE was detected in water supplies scattered throughout the country, but predominantly in areas using reformulated gasoline (RFG)(4). MTBE has apparently been making its way from leaking underground storage tanks, gasoline spills, and two-stroke gasoline engines into surface and ground water. (For more information refer to the Environmental Protection Agency web site on MTBE at http://www.epa.gov/mtbe/.) Concerns over drinking water quality have prompted 16 States and Reno, Nevada to enact legislation to restrict or prohibit the use of MTBE in gasoline.
Removal of MTBE from the gasoline pool requires not only the replacement of the lost volume but also the oxygen content, octane, and emissions-reducing properties it provides to RFG. The only oxygenate replacement that is currently considered is fuel ethanol. Although fuel ethanol has a high blending road octane value of 115 compared with 110 for MTBE (Meridian Corp., 1991), two qualities detract from its use:
- . Ethanol increases the vapor pressure (Rvp) of gasoline while MTBE has only a small effect. Because ethanol increases the vapor pressure of gasoline, low cost high vapor pressure components such as butane and pentanes must be removed from the RFG pool, which makes it more difficult and costly to produce RFG.
- Ethanol tends to separate from gasoline if stored for an extended period of time, and if an ethanol-gasoline blend is exposed to water or water vapor (as in a pipeline), the ethanol tends to bring the water into solution and the gasoline may be rendered unusable (Environmental Protection Agency, 1996). Because of these handling problems, ethanol is shipped separately from gasoline (typically by rail car or truck but not in pipelines) and is blended with the gasoline at the distribution terminal.