The Case for 95 RON Now

FROM THE APRIL ISSUE: A case for moving beyond the RFS to a 95 RON minimum octane standard.
By Dave VanderGriend | March 25, 2020

Octane. Mercedes called it the single most important parameter in designing engines. And guess what? Ethanol has the highest octane blending value and the lowest cost of any gasoline additive commercially available. Today’s vehicles adjust to take advantage of octane while improving mileage and reducing emissions. So why isn’t ethanol leading the charge toward a high-octane fuel standard?
In my opinion, the Renewable Fuel Standard is strangling us. It was intended to drive domestic, conventional ethanol demand to 15 billion gallons. However, despite the ethanol industry’s best efforts, the U.S. EPA has successfully reduced RFS-driven demand to not much more the 12 billion gallons a year, leaving our industry woefully oversupplied. Having allowed the RFS to define our value, not only does it limit our volumes, we are undeniably going backward. Plants are closing, profitability has disappeared and we are facing negative margins. And this is with the RFS in place.

With no growth driver, no end in sight to oversupply, and an industry-accepted idea that ethanol demand must be underpinned by the RFS, it is increasingly hard, if not impossible, to see a path forward to increasing industry value. Ethanol’s overreliance on the RFS creates a hostile transportation fuels market that works against improving gasoline by keeping us from capitalizing on ethanol’s greatest strength. Ethanol is not just an octane source, but a source that lowers carbon and reduces gasoline’s toxic aromatics.

So just how does our industry capitalize on ethanol’s superior octane blending value? The U.S. is one of the few countries without an octane standard, but that doesn’t mean it can’t be done. I believe a scenario where all liquid transportation fuel stakeholders bring a reasonable octane standard to Congress is not only doable, but more importantly, it will provide much-needed, long-term industry security. The ethanol industry has taken a position that it will accept nothing less than a 98 RON minimum octane standard. The petroleum industry has taken a position that, while they are willing to consider a higher-octane standard, a 98 RON minimum octane standard is a non-starter.

The reluctance of the ethanol industry to sit down and work with the petroleum industry to try and solve this dilemma is challenging. A 95 RON minimum octane standard raises the country’s octane, sets a floor on which we can build, and is possible today without need for new infrastructure development or petroleum refiner investment. By some estimates, a 95 RON standard creates a yearly 20 billion-gallon or more market for ethanol. If we engage in the hard work of crafting a standard that removes barriers preventing ethanol from freely trading, I am convinced the cleanest, cheapest source of octane will prevail and ethanol will finally realize its true potential.

The time has come to take the pen out of EPA’s hands. We must move beyond the RFS and capitalize on an octane strategy that is realistic and creates a long-term growth opportunity for ethanol. The basic pieces of a workable deal are on the table. All three main stakeholders (ag/ethanol, autos and refiners) must unite forces and together craft win-win legislation if we want to achieve success. I am asking the ethanol industry leadership to devote meaningful resources to thoroughly investigate what a 95 RON octane standard would mean for not only our industry, but also the petroleum refining industry and autos. While our team has dedicated many resources to studying and understanding 95 RON, there is much more work to be done. This work, and a serious 95 RON octane discussion, must begin now or we risk losing even more.

 

Author: Dave VanderGriend
President, Urban Air Initiative
CEO, ICM Inc.
316.796.0900
davev@icminc.com