Locator: 49141B.
Breakfast: Casey's -- link here. Includes a great video on the rise of the c-store meal: how Casey's took over small town America. Sounds like they took a page from the early days of Walmart.
Agriculture: big story -- low corn prices; farmers feeling the pain; Trump's tariffs may be used for new farm bill.
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Back to the Bakken
WTI: $63.49.
New wells:
- Friday, September 19, 2025: 30 for the month, 123 for the quarter, 563 for the year,
- 41212, conf, Slawson, Daredevil Federal 3-2-14H,
- 41077, conf, Hess, GO-Foss Fam Trst-156-97-2314H-6,
- 41075, conf, Hess, GO-Foss Fam Trst-156-97-2314H-3,
- 40814, conf, Enerplus, Fort Berthold 148-94-19D-18-10H,
- Thursday, September 18, 2025: 26 for the month, 119 for the quarter, 559 for the year,
- 40974, conf, Hess, HA-Grimestad-152-95-3031H-12,
- 40797, conf, Slawson, Daredevil Federal 2-2-14H,
RBN Energy: increasing gasoline grade differentials draw attention back to the octane market.
The last three years have seen historic changes in the U.S. octane market. The wholesale value of octane, the primary yardstick of gasoline quality and price, spiked threefold in 2022, followed by another year of high values in 2023. The numbers for 2024 and (so far) 2025 have been more stable, but still historically high. In today’s RBN blog, we look at why retail octane values have risen so high and why refiners have been capturing only a small share of the corresponding increase.
Let’s start with some background on gasoline and octane. Experienced fuel consumers who pay close attention to gasoline prices know that the retail pump price differential between premium gasoline (typically 93 octane) and regular gasoline (typically 87 octane) has increased from a long-term historical value below 20 cents/gal to about 90 cents/gal today. We can think of this premium-regular price differential (also known as the “grade differential”) as the retail value of octane; that is, the current differential of 90 cents/gal is the value the end consumer is willing to pay for the extra six (93 – 87 = 6) octane numbers that come with premium versus regular gasoline. The steady increase in the retail octane value is explained, in broad terms, as steadily increasing octane demand and decreasing octane supply. (For more detail on octane and the octane supply/demand picture, see our Breaking The Chains series.)
Refiners don’t capture the full 90-cent retail value on the octane they produce. In fact, the portion of the octane value they capture is surprisingly small. We’ll put some numbers to that below. But first, to quantify and break down who captures what on octane value, we will picture the gasoline market as a three-stage supply chain:
- In the first stage, pure refiners make refinery gasoline that is later blended with ethanol to make the 10% ethanol blend (commonly called E10) sold at virtually all retail pumps. The refiner’s octane margin depends on the prices received for their refined gasoline products (before ethanol blending), which are commonly called blendstocks for oxygenate blending (BOBs).
- Next, BOBs are sold by refiners into a gasoline supply chain. Spot supply points transact bulk volumes of BOBs near refinery hubs. Rack supply points transact smaller volumes of BOB, often off a pipeline. (The ethanol added to create E10 is mostly done at the rack level.)
- Finally, retail supply points deliver blended E10 into our cars, SUVs and trucks at filling stations.
In this high-level picture of the octane market, we consider two grades of BOB — regular BOB and premium BOB. The octane difference between the two corresponds to the octane ratings of the regular and premium retail E10 products. With this picture of a three-level supply chain (spot, rack and retail levels) and two different grades (regular and premium) of BOB and E10, we can start breaking down the market value of octane by computing the price differentials between the premium and regular product at each point in the chain. That difference is our measure of the market value, or price of octane, at that point.
To see how this works in practice, let’s start with a look at the U.S. Gulf Coast spot trading hub. Figure 1 below shows the historical U.S. average retail octane value (blue line) and the U.S. Gulf Coast spot octane value (orange line).
Figure 1. U.S. Average Retail Octane and Gulf Coast Spot Octane Values.
Sources: Hoekstra Trading, RBN
