Analysis: Is shale oil a cost effective switch or just a dent in our wallets?

ExxonMobil oil refinery, Baton Rouge, Louisiana, by WClarke [CC BY-SA 4.0]

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Shale oil’s prevalence in the American oil market may present a large obstacle for rising fuel economy standards.

Shale oil creates gasoline with a lower octane rating than gasoline created by conventional crude oil. This is due to higher concentrations of elemental components such as Naphtha present in the shale.

Some automakers are pushing to make 95 octane the new standard for fuel in the United States, which could cost more at the pump although proponents say the cost would be offset by better fuel efficiency.

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Since gasoline made from shale oil does not create higher octane content fuel, its increasing popularity will create a larger supply of less expensive lower octane rated products, putting a strain on the market for premium fuels.

In the past, fuel additives such as lead and MTBE (methyl tertiary-butyl ether) have been used to increase the octane level of fuels. However, these have been found to be dangerous to public and environmental health. More research may find safer and more efficient octane boosters, but ethanol is still the most common additive, despite its high cost. An increase in shale oil production could similarly boost ethanol demand.

Currently, premium gas costs roughly 50 cents more per gallon than regular gas. With higher supply of low octane fuel shifting the market away from producing high octane content products and the rising price of gasoline, it may be more difficult to afford to drive vehicles that require higher octane fuel for proper operation and to achieve better gas mileage.

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Though resorting to lower octane fuel might not sound like a bad idea, especially to those who pay the price at the pump, it can lead to improper timing in the engine and potentially lead to lasting damage.

Is ethanol the best solution for the necessary increases in octane level in shale oil gas? Or will something else come up as a better additive? If the market for electric vehicles continues to increase, the changes in the composition of oil used in gasoline production may become a non-issue for many.

—Peter Telschow

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