ETHANOL’S OCTANE ADVANTAGE HOMEGROWN HORSEPOWER Most of the benefits associated with using ethanol—from reducing petroleum imports to decreasing greenhouse gas Ethanol’s Octane Premium Value Over emissions—are well known. However, one of ethanol’s most Sub-Octane Gasoline Blendstock important benefits is also one of its best kept secrets: octane. Ethanolʼs Octane Premium Value Over 84 Gasoline Blendstock With an octane rating of 113, ethanol offers more engine Difference Between Regular (87) and Premium (93) Retail Gasoline Price knock resistance at a lower cost than any other gasoline $1.20 additive on the planet. Not too long ago, gasoline refiners $1.00 produced all of the octane they needed at the refinery from $0.80 petroleum feedstocks. But refinery processes to increase octane production are energy intensive and costly. In response to the $0.60 $/Gallon growing availability of ethanol over the past decade, most $0.40 U.S. gasoline producers have reduced octane production at $0.20 the refinery and optimized their operations to take advantage $0.00 of ethanol’s superior octane properties. Export markets are Jul-14 Jul-15 Jul-13 Jan-14 Jan-15 Jan-13 Sep-14 Sep-15 Sep-13 Mar-14 Mar-15 Mar-13 Nov-14 Nov-15 Nov-13 May-14 May-15 increasingly recognizing the appeal of using ethanol for its May-13 octane value as well. Ethanol provides refiners with the lowest-cost solution for Source: U.S. Dept. of Energy and RFA upgrading the octane content of gasoline to the minimum levels required for sale into commerce. Most refiners produce gasoline blendstock with an octane rating of 83 or 84, and upgrade it to 87 (the minimum allowable for “regular” grade gasoline in most states) by adding Weekly Spot Market Prices for Key Octane Sources 10% ethanol. $6.00 Not only is ethanol the lowest- cost octane source, it is also the $5.00 cleanest and safest option available. Hydrocarbon octane sources $4.00 such as MTBE and aromatics like benzene are highly toxic and pose $3.00 great risk to our air and water. $/Gallon $2.00 $1.00 $- Jul-14 Jul-15 Jul-12 Jul-13 Jan-14 Jan-15 Jan-12 Jan-13 Oct-14 Oct-15 Oct-12 Oct-13 Apr-14 Apr-15 Apr-12 Apr-13 Benzene Toluene Ethanol Source: Bloomberg and Thomson-Reuters 4 ETHANOL’S OCTANE ADVANTAGE HOMEGROWN HORSEPOWER “Ethanol’s value as an octane booster was underscored in 2015. Even with the drop “Blending Octane” Ratings of Various Gasoline Components in oil prices, we saw record demand for U.S. ethanol 120 because it remained the most 115 cost effective—and cleanest— 115 110 113 source of octane in 110 105 the world.” 104 106 100 103 101 Premium – RFA Vice Chairman 95 Grade Mick Henderson, Gasoline (93) 94 90 92 Commonwealth Agri-Energy, LLC Regular Octane Rating 85 Grade Gasoline (87) 80 84 75 70 Gasoline n-Butane Alkylate Benzene Toluene TAME Xylene MTBE Ethanol Methanol Blendstock Source: U.S. Dept. of Energy and RFA Source: U.S. Dept. of Energy and Industry Sources Weekly Spot Market Prices for Key Octane Sources What is octane and why is it important? A fuel’s OCTANE RATING is the measure of its ability to resist “knocking” or “pinging,” which is caused by the air/fuel mixture detonating prematurely during combustion in the engine. According to the Department of Energy, “Using a lower octane fuel than required can cause the engine to run poorly and can damage the engine and emissions control system over time. It may also void your warranty.” Source: Bloomberg and Thomson-Reuters 2016 ETHANOL INDUSTRY OUTLOOK 5.