June 03, 2019

Impact of E15 Gasoline Usage on US Refining

Stratas Advisors

On March 12, 2019, the U.S. Environmental Protection Agency (EPA) proposed a regulatory change to allow gasoline to be blended with up to 15% v/v ethanol (E15) to take advantage of the 1-psi Reid Vapor Pressure (RVP) waiver, which currently applies to E10 during the summer months. On May 31, 2019, the EPA approved the 1-psi RVP waiver for the summer months for E15, which has historically been applied only to E10. This change would allow E15 to be sold year-round without additional RVP control, rather than just eight months during the year.

E15 growth will depend on following factors:

  • Growth of E15-warrantied vehicles: In 2018, E15-warrantied vehicles were 40% of the total US light duty vehicle fleet.
  • Growth of retailers carrying E15: In 2018, retail stations carrying E15 accounted for 1% of total use.
  • Retailers’ ability to discount E15 to alternatives: Retailers discount E15 by 5-10 cents (2-3% or more) below E10 prices, making E15 fully economical or more economical compared to E10 — even after accounting for E15’s ~1.5% lower energy content — and enabling stores to attract more customers and increase total fuel and merchandise sales. Retailers have been able to provide this discount primarily because of RIN prices and partly due to ethanol discount to gasoline.

Considering the regulatory change, we estimate the demand for AKI 88 E15 to increase from 38 Mbpd in 2018 to 87 Mbpd in 2022 (CAGR 23%). Gasoline demand during the same period is expected to increase from 9,331 Mbpd in 2018 to 9,356 MBPD in 2022 (CAGR 0.1%).

Demand

2018

2022

CAGR

Conventional AKI 93 E0

0

1

22.3%

Conventional AKI 91 E0

0

0

20.5%

Conventional AKI 87 E0

3

6

19.1%

Conventional AKI 93 E10

723

807

2.8%

Conventional AKI 91 E10

128

132

0.8%

Conventional AKI 87 E10

5366

5377

0.1%

RFG AKI 93 E0

14

9

-9.5%

RFG AKI 91 E0

0

0

19.3%

RFG AKI 87 E0

1

3

17.9%

RFG AKI 93 E10

340

357

1.3%

RFG AKI 91 E10

62

61

-0.2%

RFG AKI 87 E10

2629

2484

-1.4%

AKI 88 E15

38

87

23.1%

E85

27

30

3.1%

Total

9331

9356

0.1%

Source: Stratas Advisors

With demand growth for E15, supply is expected to increase from 29 Mbpd in 2018 to 108 Mbpd in 2022 (CAGR 39%).

Supply

2018

2022

CAGR

Conventional AKI 93 E0

4

3

-1.7%

Conventional AKI 91 E0

1

1

-1.2%

Conventional AKI 87 E0

29

27

-2.4%

Conventional AKI 93 E10

760

891

4.1%

Conventional AKI 91 E10

137

143

1.2%

Conventional AKI 87 E10

5717

5886

0.7%

RFG AKI 93 E0

135

65

-16.7%

RFG AKI 91 E0

0

0

-2.2%

RFG AKI 87 E0

14

12

-3.3%

RFG AKI 93 E10

357

395

2.6%

RFG AKI 91 E10

66

66

0.2%

RFG AKI 87 E10

2801

2719

-0.7%

AKI 88 E15

29

108

39.4%

E85

23

39

14.0%

Total

10071

10356

0.7%

Source: Stratas Advisors

With the growth of the E15 grade, non-refinery components’ share in gasoline is expected to grow from 10.1% in 2018 to 10.3% in 2022. The growth will replace the refinery component by same amount.

Supply

2018

2022

Delta

Gasoline

10071

10356

Refinery Components

89.9%

89.7%

-0.2%

Non Refinery Components

10.1%

10.3%

0.2%

Source: Stratas Advisors

The ethanol share in gasoline will increase from 10% to 10.3%. Ethanol is expected to replace reformates from gasoline, where the reformate share is expected to decline from 15.1% to 14.9%.

Supply

2018

2022

Delta

Gasoline

10071

10356

Ethanol

10.0%

10.3%

0.3%

Reformate

15.1%

14.9%

-0.2%

Source: Stratas Advisors

A detailed report with regional-level analysis is available to subscribers of our Global Transportation Fuels Outlook service. Complete data for the analysis can be found on Stratas Advisors’ Data ToolNot a subscriber? Create an account
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