For RFG (Reformulated Gasoline) to meet VOC requirements, the finished blend must have a low Reed Vapor Pressure (RVP), generally less than 7.0 psi during the summer. Long ago, in the bad old days when our cars were big, fuel was cheap, and we actually put lead in the gasoline, there was conventional gasoline. First, transportation of this fuel can be expensive, as can the refining process to turn crude into gasoline. The prices of RBOB are directly correlated with crude oil, meaning that they will exhibit significant volatility that may be an attractive trait for many traders.
What is RBOB (Reformulated Blendstock for Oxygenate Blending)?
Refining this essential fuel can be done in a variety of ways, with the most popular being forms of “cracking”. Cracking is a process whereby hydrocarbon molecules are broken up by heat and pressure into lighter molecules. There are various forms of this process, including thermal cracking (the most popular) and catalytic cracking.
What exactly are oxygenates and why are they added to gasoline?
The figures below represent global consumption and production of crude oil, of which gasoline is derived. Choose the FREE customized information you would like to receive from the world-leading provider of news, data, and analysis for the energy, chemical and environmental commodity markets. Benchmark trades all session long with a full-day view of East of the Rockies spot fuel markets.
In investing, RBOB gas is the benchmark for gasoline on the futures market. Minimum contracts are equal to 42,000 gallons (1,000 barrels) and trade for the value per gallon. That means you need to multiply the quoted price by 42,000 to know what the contract cost will be. At their core, both RBOB and CBOB are blendstocks – components that are further mixed with other substances, notably oxygenates like ethanol, to create the gasoline we use in our vehicles. RBOB is specifically designed to produce reformulated gasoline (RFG), which aims to reduce air pollution, while CBOB serves as a base for conventional gasoline blends.
This generally occurs during a recession or Brent oil is artificially buoyed by supply disruptions. The producers search for energy which includes crude oil and natural gas. The refiner must remove light molecular weight, high RVP components, which changes the RFG’s distillation characteristics.
And, mostly, that final mixology does not happen at the refinery level. The chart above shows the weekly average import volume, in thousands of barrels, of RBOB (with special blending components for blending with ethanol) into the PADD 1—Northeast area. One of the earliest biotechnologies employed by man, the fermentation of sugar into ethanol, has been with us since prehistory.
Secondly, investments in gasoline can also be used to hedge against inflation, or simply to make a play on our global addiction to fossil fuels. Gasoline is a vital part of our everyday lives, and there is a strict need to consume no matter what economic conditions may be, making it an attractive investment during all kinds of markets. RBOB is more expensive to refine—more energy and more effort are required to pull some of the additional hydrocarbons out of the fuel. RBOB is a distillation of hydrocarbons from crude oil that is used to produce gasoline fuel.
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The addition of ethanol to CBOB results in a fuel that meets the required standards for conventional gasoline, providing a reliable and cost-effective option for consumers. The implementation of RFG has been largely successful in improving air quality in affected areas. Studies have shown significant reductions in ozone levels and other pollutants since its introduction. However, the production and distribution of RFG can be more complex and costly compared to conventional gasoline, which can impact fuel prices.
Gasoline vs Diesel
The production of RBOB, which is used to make reformulated gasoline (RFG), is more complex and requires stricter quality control than CBOB. This translates to higher production costs that are often passed on to consumers in the form of slightly higher prices at the pump in areas where RFG is required. RBOB Gasoline futures are traded on the Chicago Mercantile Exchange, with prices quoted in U.S. dollars and cents per gallon under the symbol RB.
When it comes to crude consumption, the U.S. uses more than the next four highest consumers combined. It is also important to note that our consumption is roughly twice that of our production, making our nation so dependent on foreign oil. Gasoline is one of the most widely known and used commodities in the world, primarily utilized for fuels. But its application extends beyond that industry to such uses as paint solvents, among others. In the Gulf Coast spot market, Conventional Blendstock for Oxygenate Blending (CBOB) tends to be the most liquid product because there are fewer areas requiring RFG in that region.
- RBOB is a distillation of hydrocarbons from crude oil that is used to produce gasoline fuel.
- The initial margin to hold one futures contract is $4,460, with a maintenance margin of $4,060, but these margin amounts are subject to modification by the CME based on the volatility of the contract.
- Do you find it challenging to stay on top of daily changes in fuel prices?
- This requires the removal of some heavy molecular weight and high boiling point components as well.
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Drivers use more gas in the summer, which also affects the price because of the increase in demand. The OPIS Spot Ticker provides real-time, accurate fuel price information for gasoline, diesel, jet fuel, and other refined products in all U.S. markets for a more profitable fuel transactions. Do you find it challenging to stay on top of daily changes in fuel prices? Are you tired of manually researching and monitoring fuel prices in multiple markets to stay ahead of the competition?
What’s the Difference Between RBOB and CBOB?
RBOB is formulated with a focus on minimizing the presence of components that contribute to emissions. This includes limiting the levels of aromatics like benzene and toluene, which are known carcinogens and smog precursors. RBOB may also contain additives that promote cleaner burning and reduce the formation of deposits in engines. In contrast, CBOB generally has a less restrictive composition, allowing for a wider range of hydrocarbon compounds. This can result in higher levels of aromatics and olefins, which can contribute to increased emissions. The specific composition of both RBOB and CBOB can vary depending on refinery processes and regional regulations.
- CARBOB is even more expensive, and is the main reason why California gasoline prices are typically higher than anywhere else in the country.
- Any trading symbols displayed are for illustrative purposes only and are not intended to portray recommendations.
- To fully grasp the differences between RBOB and CBOB, a detailed comparison is essential.
And, a protective layer of plastic lines the insides of gasoline delivery trucks. Say you want to buy an RBOB contract when the price is around $2.30 per gallon. That means you only need 12% of the total investment down to buy the contract on margin. Securities or other financial instruments mentioned in the material posted are not suitable for all investors. Before making any investment or trade, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice. The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security.
The fundamental principle behind RFG is to alter the composition of gasoline in ways that promote cleaner Cryptocurrency trading for beginners burning. First, RFG typically has a lower Reid Vapor Pressure (RVP), which measures the volatility of the fuel. Lowering the RVP reduces the amount of gasoline that evaporates into the atmosphere, thereby decreasing VOC emissions. Second, RFG often contains oxygenates, such as ethanol or methyl tert-butyl ether (MTBE), although MTBE is less common now due to water contamination concerns.
RBOB (Reformulated Blendstock for Oxygenate Blending) is a specially produced reformulated gasoline blendstock intended for blending with oxygenates downstream of the refinery where it was produced. Experts in the energy sector predict that the demand for RFG may increase in the coming years as more areas face challenges in meeting air quality standards. This could lead to a greater reliance on RBOB and other reformulated blendstocks. However, the rise of electric vehicles (EVs) and other alternative fuel technologies could also reduce the overall demand for gasoline, impacting the market for both RBOB and CBOB.
A single contract represents 42,000 gallons with a minimum fluctuation of $0.0001 per gallon. Listed contracts conduct trading throughout the next 36 consecutive months. For every three barrels of crude oil refined, approximately two barrels of gasoline can be salvaged.