[LOC1]

Directionally, one must agree with you.

However, once the major process units have been built to produce the gasoline components required to produce each grade of gasoline, the the operational cost involved in making several grades seems to be a blending and segregation issue. In other words, it take lots more trackage and a more robust shipping system to blend and ship 20 grades of gasoline, than it does to blend and ship 3 grades.

While the investment required for the tankage and additional working capital is significant, the operational costs in terms of energy, labor, maintenance, chemicals, catalyst, etc. don't appear to increase dramatically with the number of grades. Overall, one might estimate that the increased operational cost is of the order of a few cents per barrel.

On the other hand, the reduced gasoline endpoint requirement of the new regulations, and the requirement to limit the use of MTBE have reduced the amount of gasoline produced from a barrel of crude by 5-10%. This means more crude has to be processed somewhere in the world to make up for the lost gasoline production. It also means that the gasoline supply/demand balance becomes even tighter.

Perhaps I am missing something that you are thinking about. It has been a few years since I blended gasoline, so perhaps my perspective is dated.

[thackney]

And my experience has been either upstream or downstream of the refinery, never in it.

But the initial investment I would not assume to be slight. Also, and I think (without any backup) that the many different "recipes" prevent the free market from working efficiently. When a shortage (due to whatever) occurs in a an area, it is difficult to supply the need from other shortages. Also it reduces competition if refineries specialize.