Rising Premium Fuel Prices Due to Octane Shortage

US Environment: Blame War in Ukraine?

Oil refiners in the US and Europe are having trouble attaining a satisfactory amount of octane to manufacture superior fuel, resulting in boosted prices at the pumps, as reported by Bloomberg.

It is not at all shocking that this has happened. Experimentation of Russia in Ukraine, which stretches back more than 12 months, is an obvious catalyst; added to this, stricter American polices to promote green living and inadequate refining capabilities have also played a role. The end result?

In comparison to the same time last year, prices at the pump have skyrocketed by an astounding 15%. Regrettably, the UK has experienced an even bigger puncture in the cost gap between regular and premium fuels – having now surged to a whopping 25%. Fortunately, those seeking regular fuel with lower octane ratings will likely not be subjected to these price hikes, since the available resources for low-octane components are abundant when compared to what’s needed for high octane fuel.

Most regular automobile owners will not be influenced, unlike those with more powerful and lavish rides, such as a Ferrari F8 Tributo.

The United Kingdom and the European Union have put in place severe limitations on maritime imports of Russian petroleum, leading to a significant drop in naphtha supply – an ingredient essential for fuel production. Since energy prices have risen and demand dropped too, the availability of octane-increasing additives has also decreased. However, the decline of Russian feedstocks, which are necessary for gasoline markets to function, has proven to be a huge burden. Concurrently, Tier 3 rules in the United States have come into effect, mandating a lowering of sulfur content in gasoline.

The necessitates further hydrotreating of naphtha and gasolines – a reaction observing the comprehension of organic constituents in the use of high-pressure hydrogen – to expunge oxygen through refining.

Bank of America Corp. analysts have noted that in order to meet the lower sulfur requirements, octane levels have to be sacrificed, leading to a supply shortage and subsequently causing a surge in prices for high octane blending components. This process, they said, “destroys octane, therefore adding to the supply shortage and increasing value between regular and premium grades.”

It is confidently believed that this inclination will remain in effect until 2023. A dearth of refining capacity has, too, contributed to the disparity in costs between the two fuel categories.

Luckily, more capacity is anticipated in the second half of the year, although it doesn’t look like it will be in time for the summer– when drivers of performance vehicles most enjoy being out on the road.