A prospective biofuels manufacturer retained MathPro Inc. to estimate the economic value of iso-butanol as a gasoline blendstock in a selected segment of the U.S. refining sector, under various scenarios pertaining to federal and state regulations on gasoline properties and future prices of crude oil and ethanol.

Using refinery LP modeling, we estimated two measures of iso-butanol’s summer and winter values as a gasoline blendstock:

• Refining value: the highest net price that a refinery would pay for a blendstock on the basis of its blending properties, given a particular set of market conditions, including prices of crude oil, refined products, and other blendstocks.
  
  Refining value is a net value, after deducting all exogenous economic incentives to the refiner – such as the federal VEETC subsidy, other subsidies, RINs and other credit values, etc.


• Local netback value: the price that the blendstock producer would realize at a given refining value, ex transportation cost.
  
  Local netback value is the sum of the refining value and the total value of all economic incentives available to the refinery – including VEETC, other subsidies, and the market value of any net change in generation or use of RINs and/or benzene credits.

We developed these estimates for more than sixty scenarios, spanning a wide range of assumed future prices of crude oil and ethanol. Analysis of additional scenarios delineated possible effects on iso-butanol economics of prospective changes in regulations governing gasoline properties.

MathPro briefed the company’s senior management on the results of the analysis.