European road fuels are going through a metamorphosis

Author Elliot Radley, Editor

From September this year, the UK joins the steadily swelling ranks of countries that are offering E10 gasoline at the forecourt. Since June, Argus Media is now pricing this new gasoline specification in a transparent and predictable way.

E10 is a finished-grade gasoline, blended with up to 10pc renewable bioethanol. At present, the UK’s gasoline is E5, which contains only up to 5pc bioethanol. For the average consumer, the change is likely to go under the radar.

The vast majority of the UK’s fleet can use E10 gasoline without issue, however for a small number of models, mostly older and classic cars, it is recommended to continue to use E5, which will remain available in the form of premium RON gasoline.

For the industry, the change is more significant, as the shift in the chemical make-up of the gasoline on offer at the forecourt has a knock-on effect throughout the supply chain. Bioethanol acts as an oxygenate, and a higher ratio in the gasoline pool means a higher oxygen content.

As technical specifications dictate maximum oxygen levels, the gasoline blendstock used to create E10 gasoline must subsequently have a lower oxygen content, and in fact be more or less completely devoid of oxygenates.

The term for this blendstock is non-oxy gasoline. This differs from E5 gasoline, which because it contains lower volumes of blended bioethanol, typically contains oxygenates, such as MTBE and ETBE. The ethanol-free gasoline blendstock used to produce E5 is known as oxy gasoline.

With more of Europe moving to E10 blends, demand and supply of the product is growing -- and with it, demand and supply of the non-oxy gasoline blendstock required to produce it. That means it is extremely important that the industry has robust pricing mechanisms that reflect true value of this greener gasoline.

In June this year, Argus launched its cif Thames non-oxy (E10) gasoline cargo assessment, which aims to bring robust and transparent pricing to the UK gasoline industry.

Argus is the home of European gasoline pricing, and has been the custodian of the Eurobob oxy gasoline barge benchmark for decades which reflects the very liquid and large trading in the gasoline hub of Amsterdam-Rotterdam-Antwerp (ARA).

Argus launched its Eurobob non-oxy (E10) gasoline assessment for this barge market in 2009, and traded volumes of which hit record highs of 135,000t (178mn litres) in June making this to the new non oxy (E10) gasoline benchmark for Europe.

The final piece of the puzzle is the new cif Thames non oxy (E10) cargo quote, which means the industry has all it needs to price gasoline from refinery to pump – all of which is underpinned by sizeable traded volumes.

To ensure the UK market wholesale gasoline price is transparent and reflective for anyone following the gasoline market, it is priced as a differential to the liquid ARA hub. The ARA barge market starts to trade already in the morning and determines majority of the value for the cargo market for destinations such as the Thames.

These transactions and how the price is formed through the day can be accessed by looking at Argus information.

The advantages for forecourt retailers of using the Argus cif Thames non-oxy (E10) gasoline cargo are less surprising, more predictable and transparent gasoline wholesale pricing. The reason is that via Argus' website, the gasoline trading level in ARA, i.e. the main determinant for UK gasoline pricing levels, can be easily followed already from 9 am when the market opens.

In addition, the earlier view of the price levels during the day means forecourt retailers can reduce their price time exposure overnight. So if for example, on a D-1 pricing structure in supply contracts, this earlier view of gasoline price levels enable quicker alignment of petrol pump prices to the wholesale market.

Simply put, the Argus cif Thames non-oxy (E10) gasoline cargo is easier to use as input for pump pricing. With less than two months until this structural change in the UK gasoline market, there’s never been a better time to learn more about these pricing tools. For more information, contact Argus' Elliot Radley or Josefine Ahlström.

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