Oil refiners struggle to make premium gasoline -Dlight News

Oil refiners struggle to make premium gasoline

Here’s some bad news for drivers of luxury and performance cars who are pumping top-grade gasoline: The premium they pay on regular fuel is getting more expensive. US and European refiners are scrambling to get enough octane to make high-quality gasoline. There are several possible reasons for the shortfall, including the fallout from Russia’s war in Ukraine, the impact of US environmental regulations and a lack of refining capacity. The net effect is that it makes the fuel even more expensive than regular unleaded. In the US, the price difference is about 75 cents a gallon — about 15% higher than the same period last year — automotive group AAA showed. In the UK, premiums have risen 25% year-on-year, the most recent monthly data shows. “The current record seasonal strength in octane pricing does not bode well for a smooth transition to summer-specialty gasoline,” said Calum Bruce, analyst at Goldman Sachs Group Inc. Winter fuel contains more butane from natural gas processing to increase gasoline octane. Gasoline product octane is itself a hydrocarbon, produced in the refining of crude oil, although consumers usually know about it by the so-called octane rating for gasoline. A higher value means the fuel is more stable and engine knocking is less likely. Vehicle manufacturers often recommend high-octane gasoline — the premium grade at the pump — to get peak performance from turbocharged or high-compression engines. Regular gasoline also contains octane. However, shortages should not be a problem because low-octane components are more available to make regular gasoline than high-octane fuels. The European Union and the UK last month banned most seaborne imports of Russian petroleum products, cutting the region’s supply of naphtha, a key ingredient in making gasoline. Meanwhile, the European petrochemical industry has reduced supplies of octane-boosting additives due to declining performance due to high energy costs and weak demand. The loss of these Russian feedstocks has been critical to gasoline markets this year, according to consultant Energy Aspects Ltd. Separately, US “Tier 3” environmental regulations, which require lower sulfur content in gasoline, have created complications. Compliance with regulations requires more severe hydrotreating of naphtha and gasoline during refining. This process destroys octane, thus contributing to shortages and helping to increase the value of premium gasoline to regular grades. The gasoline sulfur standard for regulations went into effect in 2017. Fuel demand fell in 2020 due to pandemic-related travel restrictions. According to analysts at Bank of America Corp., the true effects of the regulations began to become apparent last year, as gasoline consumption recovered. “Lower sulfur requirements are met at the expense of octane levels, which contributes to higher prices of higher octane blend ingredients. “They said in a recent note. “This dynamic should continue into 2023 and gasoline prices could see an equally explosive increase this summer.” To be sure, there is debate about what’s behind the octane shortage. Manager of Refined Fuel Analytics, a division of RBN Energy According to Robert Ors, the wide octane spread — the price difference between the wholesale prices of premium and regular-grade gasoline — was primarily driven by a lack of refining capacity. Because of the lost capacity, enough to upgrade low-octane naphtha to raise its octane level to make premium gasoline. Not reformer units. That may eventually change as new refinery capacity comes online this year. “Still, we have octane spreads that remain fairly wide,” Auers added.

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