May 6, 2011 at 11:34 pm #2280
German Refiners Cut Greener Gasoline Production on Slower Demand
By Rachel Graham – May 6, 2011 6:24 AM CT
German refineries are reducing output of cleaner, high-ethanol gasoline known as E10 after motorists shunned the fuel.
E10 hasn’t met our expectations and refinery production has been adjusted accordingly, a BP Plc (BP/) official said yesterday from Bochum, Germany, declining to be identified in line with company policy. BP owns a stake in the Schwedt refinery northeast of Berlin, the first plant to switch to E10 production.
“Production of E10 has been scaled back,” said Sigrid Pook, head of the German fuel retailers’ association, which represents 4,500 pump stations. Refiners switched back to so- called Super gasoline, which contains 5 percent of ethanol, half the amount of E10, Pook said.
Germany introduced E10 gasoline this year as it sought to cut carbon emissions from transport fuel. About 57% of German drivers said in March they wouldn’t buy the fuel, fearing it may damage their cars, according to Mineraloelwirtschaftsverband, the country’s Berlin-based petroleum industry association. Motorists bought 114,000 metric tons of E10 in February compared with 1.13 million tons of Super, or E5, government data show. Total gasoline sales were 1.43 million tons.
“The German government made mandatory the use of E10, which the bulk of the German drivers with big, sophisticated gasoline engines refused to use,” Jean-Paul Vettier, chief executive officer of Petroplus Holdings AG, Europe’s biggest independent refiner, said yesterday on a conference call.
Royal Dutch Shell Plc (RDSA), which had planned to make E10 available at all its 2,200 retail stations, halted the roll-out of E10 last month, Cornelia Wolber, a spokeswoman, said from Hamburg. The fuel is available at about 1,000 of its stations in Germany, she said.
The introduction of E10 began in southern and eastern parts of Germany, after refineries in those areas including Schwedt and the Miro plant in Karlsruhe started production of the grade. Bayernoil Raffinerie GmbH, which operates plants in southern Germany, also produces E10.
The European Union has pushed for a portion of motor fuel to come from renewable sources as it seeks to combat climate change. Germany has a 6.25 percent target for biofuels, which is met by adding ethanol to gasoline or rapeseed oil to diesel.
While the sale of E10 isn’t compulsory, it would be difficult for oil companies to meet their renewable obligations if they don’t sell it, Thomas Hagbeck, a spokesman at the Environment Ministry, said from Berlin yesterday.
Petroplus, which operates a refinery at Ingolstadt in the southern German state of Bavaria, said it has benefitted from strong demand for Super grade gasoline. Increased demand for E5 was a “market opportunity that we grasped,” Vettier said.
Germany’s 6.25 percent target on biofuels is a measure of energy content. To meet that target on gasoline, 10 percent of ethanol by volume must be added to the fuel. E10 is sold at the pump under the Super E10 brand and has an octane of 95. An octane number is an indicator of a fuel’s performance.
To contact the reporter on this story: Rachel Graham in London email@example.com
May 7, 2011 at 7:53 pm #5111
Report Shows High Corn Prices Will Limit Ethanol Use, Raise Costs
Thu May 5, 2011 9:00 am ET / Yahoo News
An Energy Policy Research Foundation, Inc. (EPRINC) report released on April 28, 2011 found that high and volatile corn prices will limit the success of a renewed push to expand access to ethanol via E15 and additional E85 fueling stations. The report also found that absent a mandate, blender’s credit, and tariff protection ethanol would have a market of nearly 400,000 barrels per day, approximately half of today’s consumption, which suggests that the real cost of the blender’s credit is significantly higher than $0.45 per gallon. The study concludes that as the volumetric mandate takes ethanol blending past 10% of the gasoline pool, gasoline consumers and producers will face higher costs.
Washington, DC (PRWEB) May 05, 2011
The Energy Policy Research Foundation, Inc. (EPRINC) has released a report on the Renewable Fuels Standard, a government program that provide subsidies, tax incentives, and regulatory mandates to promote the use of corn ethanol and other renewable fuels into the national gasoline pool. The study concludes that one of the major obstacles to rapid increases of corn ethanol into the gasoline pool is the rising cost of ethanol’s principal feedstock, corn. Corn prices have more than doubled over the past 10 months, an increase considerably greater than the rise in crude prices over the same period. Growing mandates for blending ethanol into the gasoline pool is likely to further increase prices at the pump. <The report can be downloaded for free at http://eprinc.org/pdf/EPRINC-CornLimitsEthanol.pdf .>
U.S. policy requiring ever-larger volumes of ethanol blended into the gasoline pool is now running into two distinct and important cost realities, both of which are likely to contribute to price increases in gasoline above the rising acquisition cost for crude now faced by domestic refineries. The first is the rapidly rising cost of corn. Disappointing U.S. corn yields, loss of wheat crops worldwide and increasing domestic and international demand for corn has pushed prices from $3.50/bushel to over $7.50/bushel since the summer of 2010, driving up ethanol prices to levels well above the cost of gasoline when adjusted on a GGE (gallon of gasoline equivalent) energy basis. Expanding access for ethanol in the gasoline pool will not solve the cost problem because it cannot provide a cost competitive alternative to E10, the type of gasoline used by most U.S. motorists.
The Congressional debate over the deficit has highlighted concerns over the cost of ethanol subsidies, now estimated at nearly $6 billion per year to encourage its blending into the gasoline pool. Ethanol also receives other government incentives such as loan and investment guarantees. Absent volumetric mandates and blending tax credits, the U.S. would consume approximately 400,000 bbls/day (barrels per day) of ethanol, half the amount of ethanol consumed today.
The RFS and related ethanol support (mandates, subsidies, and tariff protection) have resulted in some reduction in crude and gasoline imports. However, these reductions have come at a very high cost and substantially exceed any potential energy security benefits from reduced imports. EPRINC estimates that the full cost of the $0.45/gallon ethanol subsidy is closer to $0.90/gallon as the U.S. would consume ethanol at approximately half its current volume absent a mandate or blender’s credit. By this metric the real cost of the blender’s credit is $37.80 for every barrel of incrementally blended ethanol over a subsidy and mandate free base case. Adjusted for energy content, the blenders’ credit cost is $56.70 per barrel of gasoline equivalent – a premium of $1.35 for every gallon of gasoline offset by the RFS. Estimates by CBO (Congressional Budget Office) are in the same range.
Oak Ridge National Laboratory (ORNL) released a study in 2006 that estimated the cost to the U.S. economy of every barrel of imported oil. ORNL found that the cost of imported oil to the U.S. economy is $13.58/bbl (in 2004 $) in addition to the market price. This cost includes both a monopsony component, which is the estimated effect that the U.S has on world oil prices as the world’s largest consumer of crude oil, and a cost for macroeconomic disruptions to the U.S. economy. ORNL’s calculations do not include environmental or foreign policy costs. ORNL’s study has been used by the National Highway Transportation Safety Administration (NHTSA) to provide justification for increasing corporate average fuel economy (CAFE) standards and by the EPA to promote the National Renewable Fuel Standards Program (RFS2).
In 2009 dollars, the incremental benefit of reducing oil imports by one barrel is worth $14.70 using the conclusions from ORNL. As stated previously, EPRINC calculates that the entire RFS program is reducing petroleum imports by approximately 400,000 bbls/d. Based on the ORNL study results and this estimate, the benefits of the RFS program in 2011 are not likely more than $2.5 billion. These benefits must be compared to the direct and indirect costs of the program. The blender’s credit alone costs the federal government over $6 billion per year. In addition to these costs are the costs of grants, loan guarantees, loss of efficiencies in refinery and retail operations, and rising corn prices. These additional requirements further extend the costs of the program, but even without a precise calculation of these costs, the loss of tax payer revenue far exceeds the benefits from the program by nearly 3 to 1 under the most conservative assumptions.
About the Energy Policy Research Foundation, Inc.:
EPRINC researches and publishes reports on all aspects of the petroleum industry which are made available free of charge to all interested organizations and individuals. It also provides analysis for quotation and background information to the media.
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