US has enough ethanol to replace MTBE during phaseout: Valero

Salt Lake City (Platts)--19Mar2006

The US will have enough ethanol to blend into gasoline during the current
spike in demand as companies transition away from oxygenate MTBE, according to
Valero Energy CEO William Klesse.
Valero is also eyeing potential "opportunities" in the ethanol industry,
he told Platts Sunday on the sidelines of the National Petrochemical &
Refiners Association's annual meeting. "It's still very much in the study
phase," he said, adding, "we're looking at the (ethanol) market to try to make
sure we understand it and to see what opportunities might really be there." He
would not give further details.
US refiners are in the process of replacing MTBE, known to contaminate
drinking water, with ethanol, and there is some disagreement in the industry
over whether there will be enough ethanol to go around ahead of the summer
driving season.
Last week ethanol lobbyists at the Renewable Fuels Association publicized
a letter they wrote to the Energy Information Administration criticizing an
EIA report that warned of possible gasoline price spikes due to the sudden
need for more ethanol.
The biggest bone of contention is the speed at which refiners will be
making the switch to ethanol from MTBE. EIA thinks a rapid transition has put
the gasoline market at risk for price volatility, while RFA says refiners are
planning a staged phaseout.
Valero will stop selling MTBE-blended gasoline May 5, the date the new US
energy law repeals a federal oxygenate mandate, Klesse said. "It's a two-month
phaseout (for Valero)...To me that's orderly...," he told Platts.
"Obviously (ethanol supply is) tight because the price is higher than
gasoline," he said. However, "we think there is enough ethanol."
Valero's decision to stop using MTBE is directly related to the new US
energy law's lack of a liability waiver coupled with the oxygenate mandate
repeal.
"Now that you've lost the oxygenate mandate...with that gone, we don't
think we have this protection now from defective product and that we're just
wide open (to potential lawsuits), and I believe the industry feels that way
too," said Klesse.
--Beth Evans, beth_evans@platts.com

 

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