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Author Topic: Changes in Fuels in the Cornbelt Back to Topics
brerrabbitTX

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Message Posted: Apr 29, 2013 9:22:41 AM

As I have shared before I work in the fueling industry. Part of my area is the heart of corn country, Iowa, Nebraska, South Dakota, Kansas. The two major suppliers of fuel via pipeline in the area are Magellan, and Nu Star. This area is referred to as the legacy states because they have been putting ethanol in gas since long before the RFA and the mandating of such activities. The market that grew was different than most in the US. The products that most retail sites offered are (cheapest to most expensive) 89 Mid Grade with 10% ethanol, 87 clear no ethanol, and 91 premium with or without ethanol. Unlike other areas of the country the 87 octane is actually 35 to 40% of the sales. Consummers in this area demand the clear gas, which almost seems counter intuitive that being where they are they would demand non ethanol blended fuel.

Now starting in September the base product on the pipelines will be sub octane regular, or 84.4 octane gas, which has to be blended with ethanol to make an 87 octane fuel. The only way to make a clear 87 would be to mix 50/50 the 84.4 and the 91. This would make the fuel very high priced. Retailers in the area as well as wholesalers are up in arms because their customers demand the clear fuel option. They are searching far and wide for ways to get clear gas.

I guess I just find it ironic that in the area the would seemingly benifit the most from ethanol blending would be the area that protests the loss of a clear alternative the most.
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gamechanger2011
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Message Posted: May 16, 2013 4:22:07 PM

Hannie59...where are you from?
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gamechanger2011
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Message Posted: May 16, 2013 4:19:30 PM

We were buying E97 from an ethanol plant for our location with blender pumps. We hope to get blenders at our other location although they are extremely expensive. We unbranded at the end of last year so we are no longer hostages to the oil company and we are saving money by buying unbranded fuel. Splash blending is also a method used.

Gas just went up to over $4 a gallon at the rack in our area today. Prices changed at noon. Waiting to see where Quick Trip sets their price now.



[Edited by: gamechanger2011 at 5/16/2013 4:21:02 PM EST]
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Hannie59
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Message Posted: May 16, 2013 3:38:23 PM

All blending can be done at the pump. Blender pumps can do 5 seperate blends in 1 pump from 2 tanks of product in the ground. E-0, E-10, E-30, E-50, E-85. Take your pick, set the pump to blend E36 if you want, the pump can do it. Station owners, whether they own 5 stations or 1000 stations, have to truck in the petroleum and the ethanol anyway, they both have to be delivered in a road vehicle to get to the point where you can buy it.


[Edited by: Hannie59 at 5/16/2013 3:43:15 PM EST]
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brerrabbitTX
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Message Posted: May 16, 2013 3:33:11 PM

The problem wi buying E-85 directly from an ethanol plant is the fact that they need to get the 15% gas component from somewhere. You also need the terminaling facility to blend the product and load the trucks. Gas sellers have the capabilities while the average ethanol producer does not.
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brerrabbitTX
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Message Posted: May 16, 2013 3:30:05 PM

gamechanger,
Your posted link does not tell the whole story. If you want to move towards solutions you have to be honest about it. What is not said anywhere in the link is who ultimately needs the RIN's. That is a very important piece of the puzzle that is not even mentioned. The are millions of RIN's being created every year by people and companies that don't need RIN's. RIN's are needed by refiners who if they do not generate enough must enter the market to purchase them. Because ethanol blended gas is not currently piped on a wide spread basis refiners cannot put ethanol into the fuel before it is sent into the pipeline and create the RIN. The RIN is not created until the gas gets to a terminal and is tanked. Another tank has ethanol in it. As each truck loads at the rack to deliver to a retail site, the gas and ethanol are ratio blended as it loads into the truck. It is at tha point that the renewable fuel is created and the RIN generated.

Now look at it this way. There are major oil companies across the country with no refineries capable of delivering gas into many markets. Therfore they buy bulk gasoline from another refiner. They then move it to a terminal mix it with ethanol and create a RIN. However if they don't need it to cover their own refineries, which many don't, they then sell it to the refiners who are short RINs and need it.

Who created RINs and pushed for them I don't know. But I do know this. If a regulation is passed that says refiners have to have a RIN for every gallon of gas sold into the US during a year and they cannot produce enough RINs because so many are being created by those that don't need them then there has to be a way to get them to those that are required per the law to have them. My understanding was the oil industry pushed for RINs to make sure that if needed even at a cost that the refiners could get them to avoid paying fines each year.

Now if you think about this process it makes sense that as the amount of ethanol required to be used each year then more RINs are needed and since most fuel sellers only blend e-10 one of two things will happen. RINs values increase (as they have recently) or the industry will have to blend higher ethanol concentrations.

Yes e-15 has been approved, many auto manufacturers have also greenlighted it's use as well, but the issue is the same as it always is, money! What I mean by that is all the ethanol tanks, rail spurs to bring ethanol in, delivery methods etc were all designed to handle e-10. And whether anyone from the ethanol camp wants to believe it or not the vast majority, well into the 95% range of ethanol sold in America today goes into E-10 blends. Why that is significant is because most retail fueling sites in the country do not have blender pumps that can handle making custom e blends. Further for terminals to be able to send e-15 to sites in any quantity they will have to add tanks for additional ethanol, increase the size of ethanol offloading capabilities and find the source of the additional ethanol. Take it from someone who works in the industry, we have ethanol run outs all the time today at 10% and when we don't have ethanol, we don't have gas because so many markets are required to have e-10 and cannot sell clear (non ethanol blended) gas.

So as I see it when the marginal cost of buying RINs looks to exceed the marginal cost of installing the new facilities to handle higher blends we will probably stall at the current levels. As the RIN value looks to get to high they will slowly shift to selling e-10.
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Hannie59
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Message Posted: May 16, 2013 2:52:11 PM

Same thing happened here gamechanger2011, we had a phenomenal group of 17 or so stations, owned by an LLC of an alcohol production plant. They sold E-85, E-20, and E-10 so everyone could go there to get fuel. They offered the best quality of E-85 we have ever seen here. We still can get E-85 but its not as good.

Now everyone in my neck of the woods is stuck with stations that can get only the E-85 from the oil owned terminals. And these stations either are unable to properly price it, or unwilling. I mean look at all these states that have .80 to 1.00 price spreads now. It's awesome. All stations should have the legal right to buy E-85 from an ethanol plant directly, and one thats close by.

[Edited by: Hannie59 at 5/16/2013 3:00:01 PM EST]
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gamechanger2011
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Message Posted: May 16, 2013 1:11:06 PM

I have posted this before...but for those who haven't read it.RIN Credits for Dummies
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gamechanger2011
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Message Posted: May 16, 2013 1:07:26 PM

Hannie59...we are now having to buy our E85 from the oil companies. The ethanol plant that we were buying from shut down production due to the drought. Oil companies are controlling a lot of the E85 pricing and they keep raising it. It will never be cost effective if Big Oil is controlling the pricing because they don't want it to be! Oh and they are getting the RIN's too!

[Edited by: gamechanger2011 at 5/16/2013 1:08:59 PM EST]
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brerrabbitTX
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Message Posted: May 16, 2013 9:37:17 AM

To have a relevant conversation anout RIN's I think everyone needs to get on the same page about how they are created. RIN's are generated when gas is actually blended with ethanol at a terminal and put onto a truck for delivery to a station.

So how does that work? First you have to understand that there are a whole lot more companies selling gas at terminals thaen there are refiners. So a large wholesaler (this includes the big oil companies, small oil companies and a bunch of other downstream marketers of gas) buys gas at the output of a refinery. He then puts it into a pipeline and moves it to a series of terminasl where he has agreements to store and load trucks. He also buys ethanol from a third party and has it delivered to the same terminals where he has an agreement to store and load it. He then sell fuel by the truckload to customers. Each truck that loads will take 90% gas and 10% ethanol. It is at that point that the RIN is created. Now two key points about the RIN. The guy who now owns it in many, many cases has no refineries he needs the RIN's for. The guys who do need it are forced to pay the guy who has it to acquire it for the product they refine.

Now we can debate the effect of the RIN and it's relative value all day long, but at least understand what they are, how they are created and who owns them.

For reference current RIN's trade at 70 cents a gallon or 7 cents for E-10. It can and has changed but that is the cost today. So in a world where we keep things economically whole there is an added cost to selling gas of about 7 cents like it or not. E-85 blenders are creating 59.5 cents of value with every gallon they sell so E-85 blenders are doing quite well in the current environment.
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Shockjock1961
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Message Posted: May 16, 2013 8:26:37 AM

"shocky...you are so funny! Name an ethanol plant anywhere in the country that made 1 billion last year"

Name one ethanol plant that has made anything more then a very very small fraction of product that an oil refinery does. 'nough said...

Refineries closed down all over the country last year. Check your facts!
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Hannie59
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Message Posted: May 16, 2013 8:17:03 AM

Same thing as always, they are blaming refining. But now oil industry hits NEW LOW and tries to blame RINs and ethanol. What a perfect BS mega media machine they have!

Crock, afetr crock, after after crock of **** from the oil companies and most believe it every time. Then every time another bunch of bologna on top of the last 5000. Tragic that so many have bought into it.

Good people, IF YOU HAVE A FFV, Now is prime time to get using and keep using E-85. In many areas of the country the price spread is very favorable. Alot of SELLERS gouge E-85 to make up for their minimal margins on gas (as oil companies rake all the profit, not the sellers) but many sellers also price it correctly.



[Edited by: Hannie59 at 5/16/2013 8:22:27 AM EST]
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gamechanger2011
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Message Posted: May 15, 2013 11:27:00 PM

By the way...rack prices have gone up 30 cents in the last couple of days, while crude prices are dropping. That means $4.00 a gallon gasoline where we live, when it hits at the pumps. Brerrabbit...what do you think is going on here?

[Edited by: gamechanger2011 at 5/15/2013 11:29:53 PM EST]
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gamechanger2011
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Message Posted: May 15, 2013 11:19:06 PM

shocky...you are so funny! Name an ethanol plant anywhere in the country that made 1 billion last year. Plants closed down all over the country last year. Check your facts!
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Shockjock1961
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Message Posted: May 15, 2013 10:41:42 PM

"I recently found out that a Phillips refinery in Oklahoma made $1,000,000,000 is profit last year. I think the oil industry is doing ok. Just saying..."

The ethanol and corn producers are making out like bandits. I think they are doing OK with the Government mandating the use of their products. Just saying....
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Shockjock1961
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Message Posted: May 15, 2013 10:40:31 PM

"They could make higher octane gas so those who want to would have a choice at the pump."

The ethanol and corn producers have worked hard to make sure the consumer has no choice. Now that they have succeeded in forcing their agenda, an agenda you supported GC, why are you whining about it being unfair?

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gamechanger2011
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Message Posted: May 15, 2013 10:33:58 PM

I recently found out that a Phillips refinery in Oklahoma made $1,000,000,000 is profit last year. I think the oil industry is doing ok. Just saying...
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stickyvalves
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Message Posted: May 15, 2013 5:24:11 PM

"It is a great big political mess that no one wants to fix."

Congress is good at making these. Not fixing, just making.
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brerrabbitTX
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Message Posted: May 15, 2013 4:16:41 PM

The oil companies did fight it, but as Hannie has pointed out in numerous posts he says the oil companies lied. The ethanol mandate that the RFA requires in conjunction with the increased oil prices world wide which lead to higher pump prices in the US which lead to decreased demand has lead the industry to the point that soon every gallon of gas sold in the US will have to have a minimum or 10% ethanol in it to comply with the law.

Wow that was a run on sentence! But it is the truth. Laws with mandates, quota's and requirements when it comes to the amounts produced or sold of any commodity will have unintended consiquinces. When they wrote the RFA in 2005 or so they had no way on knowing what the price of oil would do and that it would effect demand. They believed we would break the bio mass puzzle and be able to produce untold quantities of cheap ethanol from anything that once grew on the land or in the water. They also thought oil prices would remain much lower. So they confidently passed the RFA. Now 7 or 8 years later the way things have played out their predictions did not come to fruation and we are dealing with rules that did not allow for current market condition.

So as any business is likely to do when the regulatory environment give you lemons, you do your best and make lemonade. So since current estimates say that demand is falling and mandated ethanol usage is rising refiners are trying to make a little extra money by producing sub octane to let the ethanol make up the octane. If you have to put ethanol in every gallon sold to meet the RFA why would you give octane away by making 87 blending it with ethanol and selling an 89 octane product that you call 87 and sell at a cheaper price?

Mind you I am not assigning blame, saying ethanol is good or bad, and prices are right or wrong. I am merely pointing out that when industries and lobbiests push their agendas to get a bill passed they have no way of knowing how things will actually play out. We now have a RFA law that no one in Washington wants to open back up and discuss because doing so would open Pandoras box because of all the little side deals included in the legislation, and they sure don't want to do it going into 2014 with mid term elections coming up.

It is a great big political mess that no one wants to fix.

[Edited by: brerrabbitTX at 5/15/2013 4:18:59 PM EST]
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borsht
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Message Posted: May 15, 2013 2:47:35 PM

Since there is essentially no straight petro available any more and the oil refiners are moving into ethanol production. They've taken what should been genuine competition between oil gasoline and ethanol.
i.e they are moving from a OLIGOPOLY to a MONOPOLY. liguid energy fuel for automobiles.

I don't know why the oil companies didn't fight harder to keep them separate. Any comments brerrabbitTX?

At a minimum, with the mandates, a crimp in ethanol supply or oil supply will now force the price up.
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gamechanger2011
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Message Posted: May 15, 2013 11:37:10 AM

They could make higher octane gas so those who want to would have a choice at the pump. We were going to start carrying it so that we could truly give our customers a choice. There are 2 No Ethanol gas stations in our area. They are ending your choice to purchase No Ethanol gas. It's all about money with the oil companies. I think it's funny that they now are embracing what they have spent so much time bashing. They need ethanol to boost their subgrade gasoline! It's funny to me!
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Shockjock1961
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Message Posted: May 15, 2013 9:01:56 AM

Oil companies decided to deal with what the corn and ethanol producers have forced upon them in the best method possible...

Blame the corn and ethanol producers because without the mandate they have forced into being (to insure there own profiteering), the oil companies would not have taken this path...
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gamechanger2011
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Message Posted: May 14, 2013 10:31:59 PM

Oil companies made the decision to increase their profits.
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Shockjock1961
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Message Posted: May 14, 2013 2:26:20 PM

"Blame Big Oil....not the ethanol industry!"

Why? The ethanol industry and corn growers were the one responsible in getting the government to MANDATE the use of ethanol. That places the blame squarely in the their laps...
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gamechanger2011
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Message Posted: May 14, 2013 12:10:09 PM

They did this to save money. It's cheaper to make subgrade fuel. The oil companies will be making more money by blending subgrade gas with ethanol, to boost octane so that it can be sold at the pumps. It's just a ploy by Big Oil to make more money.
We have a couple of stations in our area that sell "No Ethanol" gasoline. After this is implemented, non ethanol gasoline will no longer be possible to sell. Blame Big Oil....not the ethanol industry!



[Edited by: gamechanger2011 at 5/14/2013 12:12:17 PM EST]
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borsht
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Message Posted: May 9, 2013 8:43:21 PM

I love it, you get a choice. How much ethanol do you want?
We should have a choice of zero ethanol or 100% ethanol with engines designed for both categories. This mixing Is BS.
I'm not sure the Petrol companies had any choice, but it looks to me like they have sold out to the ethanol groupies.
Of all the industries in this country that I've had the most respect for it is the Petro industry and how well they've worked with auto manufactures and environmental concerns. The API is better and has done more for standardization of their products, Now it appears they have joined the Bovine Scatology business.
But I see where we the public have tied their hands, and stopped the development like Anwar.
It really appears the inmates are running the asylum.
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Shockjock1961
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Message Posted: May 9, 2013 4:13:25 PM

"So the anti ethanol crowd will no longer be able to buy non ethanol gas"

Where have you been? I haven't been able to buy clear gaasoline for YEARS...
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brerrabbitTX
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Message Posted: May 9, 2013 2:29:16 PM

I really think most missed the obvoius irony of what I was saying here and are trying to turn it back to some grand a treachorous plot of big oil. Quite the opposite. This part of the world was and is until September 16 actually a model of how things should work to a great extent.

Ethanol blends were sold here long before any government intervention mandated to use of ethanol and any subsidies were given for ethanol. At the same time a significant segment of the gas buyers in the market 30 to 35% said I don't want ethanol in my gas. The sellers of fuels in this market said okay and provided E-10 blends to those who wanted to buy it, and clear gas to those that wanted to buy that. The sub octane issue was born from the fact that as the government has mandated higher and higher ethanol usage more and more gas is forced to be blended with ethanol. You have to get this part right to understand this: they are not making sub octane gas because the want to (although yes it is slightly cheaper to produce) they are doing it because the current value of RINs are motivating many to stop offering clear gas. Certainly there are other reasons that are primarily so what they call Group 3 gas can be more easily bought and sold into the Midwest/ Chicago market where they have sub octane and RFG's.

What is happening is a market that was an example of sorts of how it should be, e-10, clear gas and higher E blends up to E-85, will soon become a market where you can buy e blends from 10 to 85, but clear gas will be nowhere to be found. This alone will alienate even more people to dislike ethanol in general.
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gamechanger2011
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Message Posted: May 9, 2013 11:30:00 AM

Just another way for the oil companies to make money. Subgrade is cheaper to produce. They'll have to stop bashing ethanol because they have to use it now to boost the octane. So the anti ethanol crowd will no longer be able to buy non ethanol gas.
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borsht
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Message Posted: May 9, 2013 11:23:30 AM

IMHO, By forcing blends, they have removed the option of market control of letting the end user make his choice on what he prefers.
So, actually in the end the petrol industry can dump lower grade fuels into the auto fuel market, by keeping the octane rating up with ethanol.

Best would be viable alternatives, diesel ,CNG, Alcohol, gasoline or electirc or combos. It would provide genuine competition in the market.
Let the lowest cost energy get the biggest market share.
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