Consultant report

Refining economics of a national low-sulfur, low-RVP gasoline standard

This study, performed by MathPro Inc. for the ICCT, analyzes the economics of sulfur and Reid Vapor Pressure (RVP) control for gasoline. This is an extension of a 2009 MathPro study for the Alliance of Automobile Manufacturers, which evaluated the technical and economic effects in the U.S. refining sector of the Alliance’s proposed federal standard for a national “clean gasoline” (NCG) for use throughout the United States (excluding California).

The study covers four refining regions (PADD 1 through PADD 4) and analyzes three gasoline standards scenarios: 10 ppm sulfur only (no RVP standard); 9 psi RVP with 10 ppm sulfur; and 8 psi RVP standard with 10 ppm sulfur.

The study estimates that meeting the 10 ppm sulfur standard would require a capital investment of $3.9 billion, and impose an additional annual refining cost of $1.5 billion. This translates into an incremental cost of 1.4 cents per gallon of gasoline. Capital investment and annual refining costs for a 9 psi RVP and 10 PPM sulfur standard are estimated at $4.2 billion and $2.7 billion; for the 8 psi RVP and 10 ppm sulfur scenario, estimated capital costs are $5.2 billion, and annual refining costs $4.2 billion. The additional costs of meeting the RVP standards translate into incremental costs of 1.1 cents per gallon (9 psi RVP) and 2.5 cents per gallon (8 psi).

However, the sensitivity analysis indicates that reducing the average capital investment required for revamping gasoline desulfurization facilities and reducing the return on investment has the cumulative effect of reducing the estimated cost of sulfur control (alone) from 1.4 cents per gallon to 0.8 cents per gallon.

Downstream costs, such as the costs associated with transport, distribution, and storage of low-sulfur and low-RVP gasoline, are not incorporated into this analysis, nor are the capabilities of refineries outside the U.S. to produce Tier 3 gasoline.