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Oxygenate Supply/Demand Balances in the Short-Term Integrated Forecasting Model

Marcc 1, 1998

Introduction

The blending of oxygenates, such as fuel ethanol and methyl tertiary butyl ether (MTBE), into motor gasoline has increased dramatically in the last few years because of the oxygenated and reformulated gasoline programs. Because of the significant role oxygenates now have in petroleum product markets, the Short-Term Integrated Forecasting System (STIFS) was revised to include supply and demand balances for fuel ethanol and MTBE. The STIFS model is used for producing forecasts in the Short-Term Energy Outlook. A review of the historical data sources and forecasting methodology for oxygenate production, imports, inventories, and demand is presented in this report.

Fuel ethanol and MTBE usage has grown steadily since the early 1980's in response to octane demand resulting initially from the phaseout of lead from gasoline and later from rising demand for premium gasoline. Federal and local tax incentives for blending renewable fuels into motor gasoline have contributed to the growth in demand for fuel ethanol. The oxygenated and reformulated gasoline programs stimulated a dramatic increase in oxygenate demand and production capacity between 1991 and 1995 . Oxygenates now account for over 4 percent of the finished motor gasoline pool.

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