The Digest’s 2018 Visual Guide to the economics, politics of renewable fuels

What you see in this chart is a value for octane, and the average value of it is around 6.5 cents per octane point. Now, wholesale baseline gasoline is typically 85-octane (it’s boosted to 87 because high-octane ethanol is added), and wholesale baseline ethanol is 105-octane. So, you have 1.30 in octane value in ethanol (that’s 6.5 cents per point, times 20 points), seen strictly from that point of view. But, you also have the RIN value, which for corn ethanol checks in this week at 48 cents according to our friends at PFL.

That means, if you are an oil refiner with a downstream market where you can market high-octane fuels, you might see as much as $1.78 in value per gallon of ethanol. That’s $1.30 in octane and 48 cents in RIN value (which you’d otherwise have to buy to comply with RFS obligations).

It suggests why the petroleum industry is sometimes ambivalent about ethanol as an octane-laden additive, although adamantly against higher blending mandates or E85 which might cut into gasoline’s market share and upset refinery economics which are generally tuned around making as much gasoline as possible.