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Ethanol's octane value, and vapor pressure problems
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Ethanol's value as an octane enhancer
Ethanol's value as an octane enhancer is partly or completely offset by the negative value of its affect on vapor pressure (it raises the vapor pressure of gasoline) and it water soluability. Apparently the vapor pressure affect resulted in a slightly lower price for ethanol than gasoline until (as discussed above) it's octane value brought it's price up to parity with gasoline. This is the market evidence on the net value of ethanol's attributes.
1. Twenty-five years of wholesale data indicate a value of 3¢ plus or minus a few cents.
2. The "traditional pricing mechanism" in the Midwest octane market indicates
no net value.
3. The 13¢ price premium in 2006 was entirely attributed to rapid increase in
the regulatory demand for oxygenates.
While it seems likely that ethanol's net value (aside from energy) is near zero (plus or minus), it seems just possible that a value as large as 5¢ might have escaped notice. To give ethanol the benefit of the doubt zFacts has adpoted 5¢ per gallon as the net value of ethanol's octane enhancement minus the value its detrimental characteristics.
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Ethanol has 113 octane. By blending it with 88 octane gasoline, regular can be turned into premium. How much is this worth. This could be computed from the price of an octane gallon. However this price applies for blending at the refinery, which is not possible with ethanol because it cannot transported by pipeline.
The second reason ethanol does appear to claim its full value in the market place, is it's vapor pressure problem. This problem is independent of octane and causes ethanol to sell for slightly less than gasoline when its octane and oxygenate properties are not valued. Below are comments on ethanol's octane value from the National Renewable Energy Lab.
Ethanol sells at a discount to its octane blend value, at least partly because of its unfavorable effect on gasoline vapor pressure.
The value of an octane barrel is also highly influenced by the vapor pressure and other
characteristics.
Although ethanol could be used more widely as an octane enhancer, its high vapor pressure and its solubility in water are undesirable characteristics in the market for gasoline
blending agents.
Ethanol is expected to capture a significant share of the future market for octane enhancers. However, ethanol has two unfavorable characteristics for blending into gasoline:
• It increases the vapor pressure of gasoline.
• Its solubility in water prohibits its use in pipeline and conventional blending tanks.
For these reasons ethanol sells at a discount with respect to its theoretical value as an octane increaser.
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Oxygenate regulations. In 2005 ethanol had a bad year, selling far below the price of gasoline (on a per-gallon basis). In 2006 its wholesale price (after accounting for the blender's credit) was 13¢ above the price of gasoline. Here's how the State of Nebraska explains it: "The year 2006 brought the MTBE phaseout and the switch to ethanol as an additive." more
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http://zfacts.com/p/805.html | 01/18/12 07:27 GMT
Modified: Wed, 02 May 2007 06:03:56 GMT
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