Knowns and Unknowns(With thanks to Donald Rumsfeld)John KingstonThe Energy ForumApril 17, 2006
Known Knowns • MTBE is not banned. • Only in some small local pockets is MTBE likely to be used. • The lawyers are definitely in charge here. • There is almost zero chance that Congress will ever pass MTBE liability protection. • MTBE did a lot of other things besides meet some federal oxygenate rule.
Known Knowns – Part II • MTBE was about 2% of total US gasoline consumption. • It could be blended as high as 14% if the numbers were good. • Ethanol has been introduced due to MTBE bans in major population areas, and the sky did not fall. • You can make reformulated gasoline without ethanol or MTBE, but it isn’t easy.
Known Unknowns • Is ethanol supply adequate? (The price is indicating it is). • Is the nation’s rail system up to the task? (Go ask the coal people). • Has enough de-butanizing capability been put into place? • At what point does the lack of fungibility between conventional and RBOB blow spreads out to the point where productive capacities shift?
Known Unknowns – Part II • What is the role of conventional flexibility in the market outcome? • If a blender wants to make ethanol-free RFG, what are the costs of alternatives? • Will RVP waivers help? • In past crises, the market reacted in a few weeks. How long will it take this time, if we do have a crisis? • When will the RBOB contract on NYMEX come alive?
Known Unknowns – Part III • Would Congress change steep tariff on imports? • Will the market readjust by Europe and Latin America sending blendstocks here while raising the percentage of MTBE in gasoline? • How long will it take for that readjustment to occur? • How will the mix of European exports to the US change? • If it changes significantly, is this just one more logistical speed bump that has an upward push on prices?