Ethanol Switching Could Lead to Higher Gasoline Prices
eplacing a common gasoline additive with ethanol could lead to some shortages and price increases this year, particularly in Texas and on the East Coast, according a Department of Energy report issued Wednesday.
The report, “Eliminating MTBE in Gasoline in 2006,” refers to the additive methyl tertiary-butyl ether, which many petroleum companies said they would remove this year, according to DOE’s Energy Information Administration.
EIA said its 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, although ethanol-blended gasoline cannot be intermingled with other gasoline during the summer.
The decision to eliminate MTBE has been driven by state bans due to water contamination concerns and liability exposure, EIA said.
The report said the rapid switch from MTBE to ethanol could have several impacts on the market, including:
• Net loss of gasoline production capacity;
• Tight ethanol market, limited 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.
