If you buy premium gas, you’ve probably noticed that its price differential over regular has widened in recent years. This is a sign of the increase in the value of octane, the main criterion of quality and price of gasoline. In this blog series we’ve looked at a new gasoline sulfur specification called Tier 3, which is causing complications for US refineries trying to balance octane and gasoline production while meeting regulatory sulfur limits. In today’s RBN blog, the fourth and final on this topic, we provide an analysis of the obscure Sulfur Credit Averging, Banking and Trading (ABT) system, which allows refiners to buy credits to meet Tier 3 specifications. The price of these credits increased fivefold by 2022, another sign of a tight octane market that will attract more attention in the coming months and years.
In Part 1 of this series, we detailed how the price of octane has steadily risen, driven by a market now more affected by demand than by production costs. However, just as the demand for octane has been increasing, several factors have been limiting the supply of octane and recently spurred an increase in the retail “price” of octane, as measured by the difference between the prices at the pump of premium and regular petrol. which has gone from a spread of 20 cents to about 80 cents per gallon over the past decade.
In Part 2, we focused on a critical refinery stream called fluid catalytic cracking (FCC) gasoline. The Tier 3 sulfur specification requires this refinery stream, which represents 40% of the US gasoline supply, to be severely desulfurized to remove 99% of the sulfur it contains. This is necessary to meet the Tier 3 gasoline specification, which requires an average of no more than 10 parts per million (ppm) of sulfur in all finished gasoline sold in the US. This desulfurization step is where the connection between octane and sulfur comes into play. . The problem is that such severe desulfurization can lower the octane quality of FCC gasoline, which can cause a significant problem for those who must meet sulfur and octane specifications when blending finished gasoline.
