Compare Btus rather than gallons or barrels of gasoline

[Guest DC Government Worker]

Frugal drivers these days scour the roads for gasoline under $4.00 per gallon in the hopes of getting the most from their fill-up dollar. But it’s not just the amount of gasoline per dollar that matters anymore. Attention has increasingly turned to the miles a driver can get from each gallon. More and more people are purchasing fuel-efficient vehicles, while websites are popping up offering tips for increasing miles per gallon in any vehicle: keep the tires properly inflated, drive at or just below the speed limit, drive gently (rapid acceleration or deceleration wastes fuel), keep fuel and air filters clean, etc. But not only does the type of car you drive – and how you drive it – affect miles per gallon, so does the fuel you put in that car.

 

We’re all aware that we can purchase various grades – or octane levels – of gasoline: most fueling stations offer at least three grades to their customers. But what is less obvious is the additives and blending components that are combined to make the fuel you purchase. Additives such as various detergents, corrosion inhibitors, or lubricators are intended to help keep your engines clean and running smoothly. All of the blending components, such as alkylate and reformate, that make up gasoline fuel are derived from crude oil, with the exception of oxygenates – blending components that contain oxygen. The primary oxygenates that have been used in gasoline are MTBE (no longer used) and ethanol. There are two principal differences between oxygenates and the other crude-derived blending components. Oxygenates have very high octane numbers, but also have lower energy content.

 

The lower energy content is a negative attribute of oxygenates. Fuel energy content is usually measured in British thermal units, or Btus. A Btu is formally defined as “the quantity of heat required to raise the temperature of 1 pound of liquid water by 1 degree Fahrenheit at the temperature at which water has its greatest density (approximately 39 degrees Fahrenheit).” Because it takes energy to drive a car, the more energy (i.e., more Btus) your gasoline has per gallon, the further your car will travel on that gallon. MTBE and ethanol contain about 80 percent and 67 percent, respectively, of the energy in conventional petroleum-based gasoline. The result is that typical oxygenate blending reduces the Btu content of gasoline by two to three percent.

 

But oxygenates have some very positive attributes, such as high octane compared to the crude-derived blending components. They also have environmental benefits. For example, they help dilute other gasoline components that have undesirable air quality properties, such as sulfur.

 

MTBE was first used some 25 years ago. MTBE demand grew in the 1980s both in response to octane demand resulting initially from the phase-out of lead from gasoline and later from rising demand for premium gasoline. The oxygenated gasoline program, mandated by Title II of the Clean Air Act Amendments of 1990 (CAAA), became effective on November 1, 1992. The reformulated gasoline (RFG) program, also mandated by the CAAA, took effect on January 1, 1995 and required that about one-third of all motor gasoline sold throughout the year must contain at least 2.0 percent oxygen by weight (which is equivalent to 11.2 percent MTBE or 5.5 percent fuel ethanol by volume.) However, the Energy Policy Act of 2005 removed the oxygen mandate from reformulated gasoline, after it was determined that the oxygen content did not have the expected emission benefits.

 

Largely in response to these early Federal mandates, the use of MTBE increased considerably until concerns over ground water contamination and the removal of the oxygen-content mandate in reformulated gasoline led to its phase out and complete elimination from the market in 2006. As MTBE was phased out, ethanol use grew, as shown in Figure 1. More recently, crude prices have increased ethanol’s economic attractiveness, and increasing biofuels mandates such as those in the Energy Independence and Security Act of 2007 assure it a place in our nation’s future. As ethanol blending continues to grow, it will increasingly affect the Btu-per-gallon content of gasoline.

[Guest DC Government Worker]

Because the use of oxygenates in gasoline is increasing and the energy content of gasoline is therefore declining, the growth in demand for gasoline may be more accurately measured by comparing Btus rather than gallons or barrels of gasoline. Btu growth differs from volume growth when the energy content of gasoline changes significantly. For example, the slower Btu growth rate in 1992 and 1993, shown in Figure 2, corresponded to the first years MTBE use grew extensively. Again in 1995, the introduction of reformulated gasoline with MTBE further increased MTBE volumes. The growth rates remained similar in 1996-2006 when the total volumes of oxygenates did not noticeably change. However, in 2007, ethanol volume increased substantially after MTBE had been phased out. This change in oxygenate volumes resulted in Btu gasoline growth of 0.1% versus a volume growth of 0.4%. As ethanol volume in gasoline continues to increase, the growth in demand for gasoline will be more accurately represented by Btu growth than by volume growth. That is, analysts may prefer ‘Btus over barrels’ when measuring demand growth.

 

And for consumers, while it may seem that oxygenates have the Btus of our vehicles’ fuel ‘over a barrel,’ and we may get less miles-per-gallon from oxygenated gasoline on a Btu basis, we are also getting a higher-octane, less-polluting fuel.