Top 10 Bioeconomy Markets and Predictions for 2019

8. High-octane engines

If you are Livin’ La Vida Octane, good times are returning. Let’s investigate that.

In recent days. we’ve been updating some very useful industry charts relating to costs, carbon, and biofuels — and here’s another highly useful chart from the University of Illinois that looks at ethanol as a provider of cheap octane. As the UI study noted:

While certainly not equivalent to a complete mathematical treatment of gasoline blending, a direct comparison of the price of ethanol and alternative sources of octane does shed some light on the question of the marginal value of ethanol as an octane enhancer. We first addressed the issue of the relationship of ethanol prices to the price of other octane enhancers in the farmdoc daily article of January 30, 2015. In particular, we considered the price of the aromatic compounds benzene, toluene, and xylene relative to the price of ethanol. These compounds have octane ratings generally similar to that of ethanol and have a long history as octane enhancers in gasoline blends.

More on higher octane, here in the The Digest’s 2016 8-Slide Guide to NREL’s High-Octane Mid-Level Ethanol Blend Market Assessment.

What’s octane worth? The easiest way to look at it is via average gasoline prices for various fuel grades. According to AAA, the most recent US average national fuel prices are:

2.358 regular unleaded (87 octane)
2.637 mid-grade (89 octane)
2.883 premium (91-93 octane)
If you prefer the wholesale prices, EIA has these, here.
1.583 regular unleaded (87 octane)
1.769 mid-grade (89 octane)
1.940 premium (91-93 octane)

Since these fuels generally vary only in octane content, you can average these prices out and discover an underlying value of 12.2 cents per point of added octane (retail) and 8.2 cents per point (wholesale).

Which suggests that the octane value of ethanol is much higher than its price. There’s 28 points more octane in a gallon of ethanol (113 is the RON+MON/2 rating that RFA notes here, compared to the standard 85-octane gasoline blendstock that refiners use) — and that gives you a value of $3.42 in retail value per gallon to the consumer in the added octane that ethanol provides, or $2.30 wholesale. The current price for ethanol is $1.48.

How does octane relate to fuel economy? One of the best starting points is the Mazda SKYACTIV engine, since it has sharply raised the engine compression and fuel economy that you might have seen with an older Mazda 6 — yet, it’s available in a lower compression version for the US market because of the lower octane in US gasoline. So, it gives us some good comparison data.

The 2010 Mazda 6 ran on a Mazda L-engine with 10:1 compression and its EPA mileage rating was 21 city / 30 highway. Today, the 2017 Mazda 6 is running on the SKYACTIV engine with 13:1 compression and has a fuel economy rating of 26 city / 35 highway. Mazda itself claims “significantly improved engine efficiency thanks to the high compression combustion, resulting in 15 percent increases in fuel efficiency and torque” yet cautions that US models will have 3-5 percent less fuel economy because of running on 87 octane instead of 91 octane fuels. So, you gain roughly 1 point of fuel efficiency for every 1 point of extra octane, in that scenario.