US gasoline supply to rebalance quickly - EIA

10 May 2006 20:58  [Source: ICIS news]

HOUSTON (ICIS news)--The necessary adjustment in supply patterns now underway in the US gasoline market should be fairly rapid, the Energy Information Administration (EIA) predicted on Wednesday.

"The history of petroleum product specification changes, in the US and other countries, shows that after an initial period of tight supplies and somewhat elevated prices, new supply patterns emerge, and markets adjust relatively quickly," EIA said in a weekly commentary.

The recent tightness in reformulated gasoline (RFG) markets was blamed on the changeover from methyl tertiary butyl ether (MTBE) to ethanol in RFG sold in much of the Northeast and parts of Texas, which are the last remaining MTBE RFG markets. The EIA also said another key cause is the tight supply of reformulated blendstock for oxygenate blending (RBOB).

Tight specifications for RBOB, especially concerning Reid Vapor Pressure rules, make it more difficult and costly to produce. Some US refineries may find it harder to make as much RFG when ethanol is used as they formerly made when MTBE was used, it said.

"While issues regarding ethanol, including supply adequacy and the logistics of transportation, storage, and blending, have attracted more attention, the supply of RBOB is also being watched to determine if supplies are adequate," EIA said. 

The Energy Department agency also said that RFG consumers in the Northeast and Texas, like those in the Midwest, California, New York and Connecticut before them, will likely see little change at the pump, as RBOB and ethanol supplies interact behind the scenes.

EIA said the average US retail gasoline price was $2.91/gallon on 8 May, down slightly from a peak at $2.92 a week earlier but still well above $2.50 on 27 March, before prices began surging. 

(Additional reporting by Brian Balboa in Houston)

By: Stephen Burns
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