Surging ethanol blending will undermine
wholesale gasoline prices in the Atlantic Basin, starting in
2012, according to ESAIs newly updated two-year
outlook. The outlook says that ethanol will add supply to the
gasoline market, especially in the US. As this additional
volume meets organic demand growth, it will weaken gasoline and
widen the disparity between gasoline and diesel prices on both
sides of the Atlantic.
ESAI believes a new Atlantic Basin transport fuels market is
emerging. Along with more refining capacity, ethanol blending in the US will
increasingly expand domestic gasoline supply and reduce the
regions fuel import requirement. An import requirement
that was above 1 million b/d in 2008 will collapse to below
400,000 b/d by 2012. At that point, gasoline will decline
relative to diesel and stay that way. ESAI expects that New
York Harbor diesel spreads to WTI will average $9.00/barrel in
2012, whereas gasolines relationship to crude will
decline to $7.70/barrel.
While diesel-centered production will benefit,
gasoline-heavy producers will take a hit, notes
ESAI Principal Sander Cohan, Europe will have a substantial
gasoline surplus, but wont be able to send it to usual
markets. This will likely encourage refiners there
to trim back runs and reduce product output overall, making
that region even more reliant on imports from Russia and
elsewhere to meet demand.
The influence of biofuels in Atlantic Basin fuel
market dynamics is a relatively recent phenomenon, but is
expected to accelerate and deepen in the coming years across
the region. Consequently, refiners will come under continued
pressure to adapt to this new market dynamic, especially as
gasoline and diesel diverge.