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March 29, 2018
At a recent American Fuel and Petrochemical Manufacturers meeting, General Motors executive Dan Nicholson voiced the automaker’s support in raising the minimum octane rating of the U.S. gasoline pool from 87 to 91, or what is currently marketed as premium. Not only would this standardize the gasoline pool – and vehicle design – with what’s available in Europe, it would allow for a small, but significant and immediate bump in fuel efficiency. The ethanol industry is optimistic over this prospect because there are two potential sources of additional octane – the BTEX complex, an expensive, toxic petroleum refining product, or cleaner-burning, cheaper ethanol.
While the auto industry has for some time acknowledged the superior performance and efficiency that high octane fuels enable in engines, the renewed commitment comes at an interesting crossroads. While every major automaker has signaled a commitment to vastly increasing the offering of hybrid and electric vehicles, General Motors alone has announced plans for 20 new zero-emissions vehicles over the next five years. Additionally, it’s expected any day that the Trump administration will announce plans to soften fuel efficiency standards for automotive manufacturers. So, with regulatory relief on the horizon, and a push to go electric – why the focus on fuels?
Octane is a necessary component of gasoline that provides “anti-knock” properties. Increasing the efficiency of the internal combustion engine through the use of renewable blending components has the greatest potential to increase the efficiency of both conventional and hybrid vehicles. Higher octane gas allows for greater fuel efficiencies, but engines must be optimized to run on higher octane gas. Putting premium gas in a vehicle not optimized to run on premium provides no benefit to the consumer or the environment. But as Nicholson mentioned at the oil industry meeting, by matching high octane fuels and higher compression ratio engines, the industry can squeeze out an additional 3 percent in vehicle efficiency. Seems like small potatoes, until you add this up over every new vehicle sold in the United States.
A higher octane gasoline blendstock is the cheapest option for automotive manufacturers to increase vehicle efficiency, and with low-cost efficiency measures by and large deployed, automakers are interested in tapping this low-cost option. But getting consumers and the petroleum industry on board is where things get complicated. While it’s true that premium gasoline has a higher profit margin for the petroleum industry, a national changeover to a premium blendstock would require not insignificant changes to the refining industry. Enter ethanol – a high-octane blendstock. While it may be easier and cheaper to increase blending of high-octane biofuels, this would continue to erode petroleum’s market share and require some changes at the retail level.
On the consumer side, premium gas is aptly named – because it is sold at a premium. As of early March, the price differential between regular and premium was 52 cents, which translates to about $2,000 over the lifetime of the vehicle, according to a recent calculation by Forbes. That’s where ethanol gets interesting, because it is much cheaper than premium. For example, an E25 blend with an octane rating of 98 (3 points higher than the proposed 95) sells at 4 cents cheaper than today’s regular 87 octane gasoline, providing a discount of 56 cents per gallon, relative to today’s premium gasoline.
Recognizing that liquid fuels will be in use for several decades, the Department of Energy (DOE) has been conducting research on the co-design of fuels and engines for maximum efficiency, under their Co-Optimization of Engines & Fuels (Co-Optima) work. The primary thrust of this research has been studying the octane properties of various renewable octane components, including, but not limited to ethanol. Recent research from Co-Optima has shown that new renewable blendstocks and engines could increase vehicle efficiency by 10 percent. According to DOE, “the goal of this research is to provide American industry with the scientific foundation needed to maximize vehicle and fuel performance and efficiency.”
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