| US gasoline imports seen surviving MTBE phase-out |
Fri Mar 10, 2006 3:18 PM ET
NEW YORK, March 10 (Reuters) - Foreign refiners should be able to quench the U.S. thirst for gasoline imports this summer driving season despite the coming change in specifications as additive MTBE is phased out, industry experts believe.
U.S. gasoline imports have been running well above a million barrels per day in recent weeks, helping boost commercial stockpiles to the highest level in seven years, and analysts said new looming fuel blends shouldn't hamper shipments.
"Every year it seems we have this speculation about whether or not Europe can meet the specifications, but every year they do," said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
Twenty-five states have enacted bans on MTBE, an oxygenate used in anti-smog gasolines required at a third of the nation's pumps, because of concerns about MTBE runoff polluting water supplies. Bans in California, New York and Connecticut are already in effect.
The oil industry is gearing up to remove MTBE completely from reformulated gasoline as early as this spring, replacing the controversial additive with ethanol -- a shift that requires a new form of unfinished gasoline called RBOB.
"As only one company is involved in what appears to be an industry-wide movement, we cannot say if there will be a shortfall of Reformulated gasoline Blendstock for Oxygenate Blending (RBOB) supply," said a Chevron Corp. spokeswoman in an e-mail to Reuters.
"However, judging from prior experiences when MTBE has been eliminated from various U.S. states over the past several years, including from California in 2003, we expect the transition to go smoothly."
Chevron said its Pembroke, Wales, refinery "is able to produce a variety of reformulated fuels" for export.
Northwest Europe's refineries have been through heavy upgrades in recent years and the majority of the more modern, upgraded plants can make nonoxygenated Eurograde, according to European traders and refining sources. A smaller number of refiners and blenders make and export RBOB.
Mediterranean refineries are less equipped to make nonoxygenated grades, with some plants running integrated MTBE production and blending. That may cause a greater percentage loss of exports from that region, traders said.
The United States imports more than 10 percent of its gasoline supply, with most of the shipments coming from Europe, where drivers favor diesel.
"Other countries may have trouble making RBOBs," EIA analyst Joanne Shore told a conference call on Feb. 28. "Europe, though, has the capability to do this. We may lose some suppliers, but Western Europe has the ability to make up that shortfall."
But other experts caution the transition may not be smooth.
"It will be a challenge," said John Felmy, the industry group American Petroleum Institute's chief economist, expressing some caution and noting the "uncertainty" that has always accompanied large fuel specification changes in the past.
"Demand will be one of the key factors," said API's Felmy.
Demand for gasoline tends to pick up in the summer as families go on vacation.
The U.S. average retail regular gasoline price was at $2.33 a gallon in the week to March 3, according to the U.S. Energy Information Administration, up 33 cents from a year ago and the highest level in a month. (Additional reporting by Melissa Akin in London)
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