The Clean Transportation Advisory Council retained MathPro Inc. to conduct a brief refinery modeling analysis to estimate the potential effects of eliminating MTBE use in gasoline production by the Delaware Valley refineries. For this analysis, we constructed an aggregate refinery model representing (1) the combined process capacity of the Delaware Valley refineries, (2) the average crude oil used by Delaware Valley refineries, and (3) the operating environment and product pricing experienced by these refineries over the past two summer seasons.

The study considered two gasoline production scenarios to bracket the possible range of responses by Delaware Valley refineries to the elimination of MTBE use. In one, the refineries use 10% ethanol in formerly MTBE-blended RFG; in the other, they use neither MTBE nor ethanol in RFG. In each gasoline production scenario, we considered two sets of economic conditions under which the Delaware Valley refineries might operate. In one, the refineries optimize the production of RFG and conventional gasoline (CG) without allowing the marginal cost of gasoline production (RFG and CG) to change in response to the MTBE ban. In the other, the refineries maximize RFG production (while producing CG at constant marginal cost) in response to market conditions that support an increase of up to 20¢ per gallon in the marginal cost of RFG production.

Results of the analysis indicate that eliminating MTBE reduces the Delaware Valley refineries’ gasoline production capability by removing from the gasoline pool not only MTBE’s volume, but also its octane and its other premium blending properties. Substituting ethanol for MTBE compensates somewhat for the lost volume, but requires removing additional high-RVP blendstocks from the gasoline pool (to compensate for ethanol’s effect on RVP) and raises the cost of producing equivalent volumes of RFG. Making up the production shortfall caused by eliminating MTBE use requires that refineries invest in expanded refinery capacity and process additional crude oil or import intermediate refinery streams or high quality gasoline blendstocks.