Eliminating MTBE in Gasoline in 2006
February 22, 2006
In 2005, a number of petroleum companies announced their intent to remove methyl tertiary-butyl ether (MTBE) from their gasoline in 2006. Companies' decisions to eliminate MTBE have been driven by State bans due to water contamination concerns, continuing liability exposure from adding MTBE to gasoline, and perceived potential for increased liability exposure due to the elimination of the oxygen content requirement for reformulated gasoline (RFG) included in the Energy Policy Act of 2005. EIA's informal discussions with a number of suppliers indicate that most of the industry is trying to move away from MTBE before the 2006 summer driving season.
Currently, the largest use of MTBE is in RFG consumed on the East Coast outside of New York and Connecticut and in Texas. The other RFG areas in the Midwest and California have already moved from MTBE to ethanol. Most companies eliminating MTBE in the short-run will blend ethanol into the gasoline to help replace the octane and clean-burning properties of MTBE. The rapid switch from MTBE to ethanol could have several impacts on the market that serve to increase the potential for supply dislocations and subsequent price volatility on a local basis. These impacts stem mainly from:
- Net loss of gasoline production capacity
- Tight ethanol market, limited in the short-run by ethanol-production capacity and transportation capability to move increased volumes to areas of demand
- Limited resources and permitting issues hampering gasoline suppliers abilities to quickly get terminal facilities in place to store and blend ethanol
- Loss of import supply sources that cannot deliver MTBE-free product, or that cannot produce the high-quality blendstock needed to combine with ethanol
The different properties between MTBE and ethanol affect not only production, but distribution and storage of gasoline as well. Ethanol-blended gasoline cannot be intermingled with other gasolines during the summer months, and ethanol, unlike MTBE, must be transported and stored separately from the base gasoline mixture to which it is added until the last step in the distribution chain. Many areas of the distribution system cannot handle additional products without further investments.