How Niznik Refine Petroleum-based Octane Boosters

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According to Niznik, there may be some justification for that fear. "Refiners are looking strategically up the road," he says. "They're looking at forecasts of shrinking gasoline demand. They could say to themselves, 'Why should I be giving 10 percent away? I

According to Niznik, there may be some justification for that fear. "Refiners are looking strategically up the road," he says. "They're looking at forecasts of shrinking gasoline demand. They could say to themselves, 'Why should I be giving 10 percent away? I want to sell product that's mine!' "

 

Switching to petroleum-based octane boosters such as alkylate would not be easy, though. In the short term, Niznik says, it would be self-defeating. Oil companies are competing against each other to make cheap gas, and "the guy with ethanol is probably going to win."

 

But those other sources of octane are getting cheaper, Niznik says, and in the long run, they might be just as cheap as ethanol. In 10 years, he says, the business case for using ethanol could disappear.

 

But even that might not be enough. There's a complex set of local, state and federal regulations that also tend to favor ethanol. A few states require a 10 percent blend of ethanol. Others, like California, have air quality regulations that make it very difficult to replace ethanol.

 

"It would be very hard to unravel things like that," Niznik says. "It's like the tax code. Lots of things are tied into it, and that makes it very hard to change."

 

But he also expects debate over the ethanol mandate to continue, because "it's a great political football." By defending the Renewable Fuel Standard, or attacking it, politicians define themselves, and their supporters.

 

This view of the RFS is widely shared across the political spectrum, including, for instance, the editorial board of The Washington Post. Groups hurt by high corn prices, including hog farmers and the fast food industry, are on record calling for the abolition or relaxation of the ethanol mandate. In fact, even ethanol's backers, in their fierce defense of the RFS, appear to believe that it is essential for the survival of their industry.

 

But is that really true? It took ethanol-dissing Ted Cruz's victory in ethanol-loving Iowa's Republican presidential primary to finally persuade me to hit the phones and figure this out.

 

I found two experts who've examined this question in great detail: Paul Niznik, an analyst at Stratas Advisors, an energy consulting business in Houston, and Scott Irwin, an economist who teaches at the University of Illinois. And here's their bottom line: If the law changed tomorrow and gasoline companies were free to ignore ethanol, they'd almost certainly keep right on blending ethanol into their fuel.