Posts by Hoekstra Trading LLC
Hidden costs of Tier 3 gasoline hurt refiners’ gasoline production and profit margins
For the first time, US refiners are being challenged to meet the EPA’s Tier 3 10-ppm sulfur gasoline specification while making gasoline at full rates. This is causing an “octane/sulfur squeeze” which also puts the squeeze on gasoline production, crude flexibility and profit margin capture: Many US refineries are under-equipped to make Tier 3 gasoline…
Read MoreA billion dollar question: do refiners recapture RINs expense?
There is much confusion in the refining industry on whether and how $billions/year of Renewable Identification Number (RIN) expenses are being passed through and recaptured by refiners in their profit margins. The issue has been around for many years and re-surfaces during run-ups in RIN prices. For example, in the Phillips 66 first quarter 2021…
Read MoreNew gasoline specification is increasing gasoline prices
As gasoline demand increases, a new specification is increasing gasoline prices. The specification, called the Tier 3 Standard, limits gasoline sulfur to 10 ppm maximum versus the previous (Tier 2) 30 ppm limit. The Tier 3 Standard was enacted in 2014 and phased in starting in 2017, with full implementation in 2020. Now is the…
Read MoreUnderstanding RIN Price Fundamentals
It has been proven the pricing of D4 RINs follows basic economic and asset pricing theory. In 2020, the theory was cast in the form of a mathematical model by professors from the The University of Illinois and Harvard University. Hoekstra Trading implemented their model, which I call the IMS model (IMS is an acronym…
Read MoreHoekstra Trading RINs price spreadsheet model
This chart shows, in green, the price of D4 RINs traded from 2011 through March 2021: The black line represents a theoretical pricing model for the D4 RIN developed by professors at The University of Illinois and Harvard University. Their modeling work shows the D4 RIN price responds in a rational way to changes in…
Read MoreOPIS Alert – Tier 3 gasoline resurfaces
Here’s Tom Kloza’s latest writeup on Tier 3 and sulfur credit prices: *********** 2021-03-09 04:50:16 EST ***Tier 3 Sulfur Gasoline Resurfaces as Issue for Some Refiners, Importers Some refiners who have complained about the necessity of purchasing expensive Renewable Identification Numbers (RINs) have something else to complain about this week. After a long period of…
Read MoreSix ways to optimize Tier 3 gasoline
This Q&A appeared in the journal PTQ Catalysis March 15, 2021: Q: Is there a route for post-treating gasoline with minimal octane loss? A: George Hoekstra, President, Hoekstra Trading LLC, [email protected] Here are six handles to improve octane/sulfur performance in your gasoline desulfurizer: 1) Feed properties: controllable variables are feed source (FCC naphtha and other…
Read MoreW.R. Grace – Hoekstra Trading team up to help refiners optimize Tier 3 gasoline
This Q&A appeared in the journal PTQ Catalysis, March 15, 2021: Q: Is there a route for post-treating gasoline with minimal octane loss? A: Colin Baillie, Segment Manager, Environmental Additives, W. R. Grace & Co, [email protected]; and George Hoekstra, President, Hoekstra Trading LLC, [email protected] One way to minimise octane loss in post-treated gasoline is through…
Read MoreGasoline sulfur credit market turnaround
This week Tier 3 gasoline sulfur credits traded over $1,000 / million ppm-gallon. That’s 5 times higher than the bottom price in November 2020, but still far below the pre-lockdown peak. The true demand for Tier 3 credits has not yet emerged. That will happen when the North American refining system fully adjusts to the…
Read MoreTier 3 Q&A Part 3
These questions were asked during recent industry conferences: Are there any services that are reporting Tier 3 sulfur credit market prices? •The prices are confidential and hard to get •The best way is direct involvement in actual transactions •OPIS and Argus Media offer data for $. •There are very few inter-company trades •Our client group…
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