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Shell's New Avgas: Inside Comments

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Shellís announcement of an unleaded replacement for 100LL last week has drawn lots of attention, deservedly. At this weekís ASTM meeting in Tampa, I spent time buttonholing the worldís fuel experts about what this means for the world of GA. The fuel guys are mostly curiousóintensely soóabout what formulation Shell has cooked up, but the company didnít so much as tip a face card at the meeting. So all we know is what we reported last weekóitís an alkylate-based fuel with an aromatic additive package. We know nothing about its performance, its producibility and, above all, its price.

That is, understandably, where most of the consumer curiosity lies. After all, we can reasonably expect that a $467 billion international petrochemical conglomerate can figure out how to refine a few hundred million gallons of 100-octane fuel, provided theyíve got the formula right. No promises there, but Iíll stipulate that for the purposes of this blog.

Our mail following the Shell announcement indicates there are some misconceptions about price expectations. In all the reporting Iíve done on this subject, no one in the fuels, aircraft or engine industry has assumed that the replacement for 100LL will be cheaper. At the very best, it will be comparable and how you define that is rubbery. Will it be within 5 percent or 10 or 15 of 100LL? Take your pick. (Iím going with between 10 and 15 percent.)

Some people think because lead will be eliminated, the refiners will save a bunch of dough on both additives and transportation. But thereís no reason to believe this is so and no one in the petroleum industry has ever said this to me. As an octane enhancer, lead is close to dirt cheap compared to other alternatives. Iíve been told as little as a dime a gallon to up to 40 cents. I suspect for most refiners, the real number is between the two. In any case, the aromatic hydrocarbon packages that seem likely to replace lead are more expensive and likely to remain that way, since theyíre commodities driven by broader economic conditions.

One letter writer thought that refiners and distributors will save a bundle on these new fuels because they can be transported by pipeline while leaded fuels canít be. But thereís a better chance of seeing Diet Pepsi bubble through the Colonial than there is unleaded avgas. The volume simply isnít there. One source told me the minimum volume for a pipeline batch is 5000 barrels or about 210,000 gallons. Sounds like a lot, but anemic, widely dispersed demand at the other end means that stuff will have to be stored somewhere and refiners and terminals donít like to do that. It costs money for tankage and unsold inventory has value that can eat up any savings in transportation. Also, thereís the transmixóliquid fuels mix when the products are changed in the pipeline and that has to be trucked back to the refinery for recovery.†More than likely, truck and rail will be the transport of choice, unless Amazon decides to move avgas by drone.

Further, because of the liability issue, itís quite likely that aviation fuel will continue to be sequestered in dedicated storage, lead or not. The liability of off test fuel is real and high and Iíve been told that refiners arenít going to want to risk contaminating a batch. (Recall that Chevron had that very problem in 1994, when it paid $40 million to replace engines potentially damaged by off-spec avgas.) It may be true that distributors will no longer need dedicated tankers, but thatís unlikely to swing the economics downward much, if at all.

The most powerful market force here may be something no one can control: declining volume. The less avgas is made, the less likely there are to be production economies of scale and, perhaps, the less likely there will be either new entrants into the business or meaningful price competition. I donít mean to depress you, but the data here is grim. According to the U.S. Energy Information Administration, the production of avgas has been in continuous decline for more than 40 years, although there have been plateaus and brief spikes. The last high was in 2006, when EIA reported 276 million gallons of avgas refined. For 2012, the number dropped to 204 million. Trends in Europe are similar, while Asia has shown spotty growth. Even Chinaís avgas consumption is down since 2009. (Note: thereís argument about the accuracy of EIA numbers; some insist the U.S. volumes are larger than EIA says. But itís the directionality thatís important.) The point is, this is not a market which is likely to incite intense price competition nor, perhaps, new entrants for the next half decade or so.

One hope was that a new avgas could be a terminal productóthat is, something blended up from large-volume stock sloshing down the pipelines. Thatís what Airworthy Avgas will be doing with itís new mogas product. Nice idea, but for avgas, itís hard to see how this will work. Shell says its base feedstock is aviation alkylate, a pricey, low-volume refinery product that neither moves by pipeline nor is found hanging around in the average terminal. So that argues for Shellís unleaded avgas being a refinery product. But how many refineries? Too soon to say. Shell signaled that it might re-enter the avgas refinery business in North America or simply license refining of its avgas to other facilities, of which there are many. But itís not clear how many have the high-quality alkylation plants Shell will probably need to make its fuel work.

As for timing, we may not see this new fuel before 2018 and perhaps not before 2020. Because itís clearly going to be as expensive or more expensive than leaded avgas, thereís no price push to draw unleaded fuel into the market. It will be done by regulatory declaration. Figuring out when EPA is actually going to move on this makes reading tea leaves look like childís play, but the FAAís approval timeline for these fuelsóand they plan to perform final testing on only two fuel candidatesóruns to 2018. It might happen faster, but thatís the outside line. The FAA testing plan hasnít been detailed yet, but itís involved. The rest seems to be up to EPA or perhaps the courts.

So, my informed-as-I-can-get-it guess is, allowing for inflation, the 2019 average cost of avgas will be between $6.80 and $7.25. As of December 2013, AirNav.com†reports the U.S. national average at $5.87. The perverse thing about avgas prices is that the spread between the very highest ($11.21) and the lowest ($3.99) is more than a buck higher than the national average price.

If that doesnít make a mockery of supply-and-demand theory, Iím sure I donít know what does. In the next blog, we'll look at the FAA approval process.

Join the conversation. †Read others' comments and add your own.

Comments (24)

The lack of comments here to me suggest this topic has too many implications or has no possitives to draw upon. On one hand the aircraft that need the high octane fuel will continue to soldier on with unleaded fuel. On the other, those who need not the high octane are paying a heavy premium to fly their certified engines on certified fuel. $6.00 / gallon fuel is and will continue to kill our industry. Those will ample resources will pay for it at any cost, but for the masses of existing and aspiring pilots, the cost vs. value of flying will ultimately cause general aviation to self-destruct. FBO's with captive audiences at desireable destinations are marking up fuel so much it makes it simply unpleasant to stop there. I love snow skiing, but the past two years I didn't go due to escalating costs vs. value. For me, I evaluate everything and I no longer even enjoy the experience because of the spike in prices. Flying is next on the list.

Posted by: Michael Piervy | December 11, 2013 9:14 PM    Report this comment

Lack of comments suggests to me that people are too dazed after banging their heads against something solid. I'm glad there appears to be progress but from now on, my antennae will be more sensitive to developments in engines that burn a wider, cheaper cut of fuel.

Posted by: john hogan | December 12, 2013 1:32 AM    Report this comment

"More than likely, truck and rail will be the transport of choice, unless Amazon decides to move avgas by drone."

Ahh, comments like that are why I read these blogs! At least one thing in the article made me laugh, even if the rest of it was rather depressing.

I agree with Michael, though: $6+ avgas really is hurting GA. I believe plenty of pilots can afford it, but it's the whole psychological effect it has, particularly on the pilots who have been around longer than I have and can remember significantly cheaper avgas. mogas prices have tripled since I started driving (and avgas prices have about doubled since I started flying), but unless you live in a city with great public transportation, we have no choice but to pay the higher mogas prices. We do have a choice with avgas, though, by not flying. Unfortunately for GA, more and more pilots are going that route.

Posted by: Gary Baluha | December 12, 2013 8:58 AM    Report this comment

"mogas prices have tripled since I started driving "

Cry me a river, buddy. They've risen by a factor of 12 since I started driving. :) (Shows how old I am.) Of course, if we consider inflation-adjusted prices, then gasoline prices are up about 40 to 50 percent since the 1970s.

The other thing to consider is how much less gasoline you use now for the same miles driven. The fleet average economy has more than doubled since the early 1970s so effectively, you spend less to drive the same miles, inflation adjusted. And that explains why most of us don't really cut back much on driving because of gas costs.

Airplanes are totally different. No fleet economy gains, no performance improvements and only dancing pictures in the panel to improve the experience much. And while pilots complain about costs, especially fuel, they don't respond to it the way other consumers seem to.

If they did, mogas would be more popular.

Posted by: Paul Bertorelli | December 12, 2013 10:07 AM    Report this comment

I can't really understand why unleaded avgas needs to be based on anything except Mogas. The engines are so similar, older ones are exactly the same. Nothing much new at all.

Why can't there be just an additive package for Mogas? Or maybe that's barely needed.

What we really don't need is a low volume boutique fuel that is very expensive. No matter how great it is.

Posted by: Steve Waechter | December 12, 2013 11:03 AM    Report this comment

"And while pilots complain about costs, especially fuel, they don't respond to it the way other consumers seem to.

If they did, mogas would be more popular."

I would install the mogas STC for my airplane, if I had access to the proper ethanol-free mogas in my area and where I typically fly. But since I've never been to an airport selling mogas, the cost to install the STC just isn't worth it. If mogas became more available, I would try to convince my partners to go for it, though. But in the mean time, the only choice I have if I want to fly my plane is to pay for the $6/gal avgas.

"The fleet average economy has more than doubled since the early 1970s"

I've never driven a car old than 1988, any my current car (a sports car) gets about the same mileage as my first car (a full-size sedan). ;-) Both my auto fuel and avgas costs have both gone up, but proportionally (though not numerically), my auto fuel costs have gone up more. As a result, the avgas price increases I've experienced since I started flying in 2006 take on a different perspective than someone who has experienced auto gas and avgas increases since the 1970s or so.

At least, that's my theory of why the older pilot community typically chooses to just hang up their wings, rather than continuing flying when they otherwise might do so. They might be able to afford it, but it's too depressing to see the fuel bill. And the younger pilot community is simply being priced out of affordability, unless they're fortunate enough to have a decent income and low expenses like I do.

Posted by: Gary Baluha | December 12, 2013 11:24 AM    Report this comment

One of the drivers of price is volume. If this replaces 100LL and can be run in engines that were built for 80 and choked on 100LL then the volume might increase. Also, since this is a non-leaded fuel there may be other outlets for it that require a high performance fuel. Perhaps auto racing. Perhaps marine racing. Perhaps . If that occurs then it will drive volume up and might have some positive impact on cost for all of us.

Posted by: Joel Ludwigson | December 12, 2013 11:45 AM    Report this comment

Again (and still) with the "one-size-fits-all" AVGAS solution. It didn't work in the '70s with 100LL, and it isn't going to work in the 21st century either.

100LL can be refined and delivered to the airfield without the lead at about 94 octane. This fuel would work with the vast majority of aircraft including every aircraft with a MOGAS STC. It would be, by far, less expensive than a new 100UL and likely be less expensive than developing a new "aviation grade" MOGAS some are pushing.

For aircraft needing 100+ octane, TEL can be added at the pump much the same way that Ethyl was added to car gas in the '40-'60's (but in a more controlled and environmentally safe manner than pouring a can of additive in your tank). Think of the way that local water is filtered, carbonated and mixed with syrup to make soda at your local fast food restaurant.

Those truly needing 100 (or more) octane can get it at an additional cost while the vast majority of other aircraft operators aren't forced to pay for octane they don't need or want. After the initial (large) drop in lead usage, the demand for TEL will slowly reduce as engine manufactures find ways to get the performance they want from unleaded gas (most already have) and the older technology engines fade from use. But 100+ octane will continue to be available to those who truly need it (i.e.: war birds).

The dirty little truth is that, for the most part, aviation doesn't need 100+ octane. Why should we be forced to pay for it?

(for the record, I own both a plane that requires 100 octane and one that only needs 94)

Posted by: Kris Larson | December 12, 2013 2:44 PM    Report this comment

"It would be, by far, less expensive than a new 100UL and likely be less expensive than developing a new "aviation grade" MOGAS some are pushing."

Actually, this isn't supported by fact. The fuel you are talking about is a dedicated, alkylate fuel and that will never be as cheap as autogas products that move in bulk as commodities through pipelines. Lead or not, it will always be a boutique, refinery fuel.

Posted by: Paul Bertorelli | December 12, 2013 4:04 PM    Report this comment

Paul, I don't see that we need it. We need an additive for Mogas, or an aviation version of Mogas that can be made at the depot from the Mogas they are already shipping.

Posted by: Steve Waechter | December 12, 2013 4:49 PM    Report this comment

Steve, what you're describing is Airworthy Autogas, which is premium mogas with a proprietary aviation additive package for octane enhancement and vapor pressure control. The thinking is that such a pedigreed fuel might help overcome biases against mogas.

See www.avweb.com/blogs/insider/Mogas-The-Great-Missed-Opportunity-220693-1.html

Posted by: Paul Bertorelli | December 13, 2013 4:30 AM    Report this comment

Paul, this topic has been going on for years now. You and Avweb have the point on this mission - thanks for your outstanding study and reporting. No one does it better.

Posted by: Rafael Sierra | December 13, 2013 8:13 AM    Report this comment

"At least, that's my theory of why the older pilot community typically chooses to just hang up their wings, rather than continuing flying when they otherwise might do so."

Be careful Gary, one day soon you will look over your shoulder and realize that you too are part of "the older pilot community" :-) It happens to us all. Enjoy the days of youth, they are few!

Posted by: A Richie | December 13, 2013 8:54 AM    Report this comment

And when that happens, hopefully there will be younger pilots to replace me! ;-)

Posted by: Gary Baluha | December 13, 2013 9:31 AM    Report this comment

Gary, the fat lady is singing. Everyone go out and fly.

Posted by: Rafael Sierra | December 13, 2013 9:44 AM    Report this comment

"Why can't there be just an additive package for Mogas?" There is. It's called "tetra-ethyl lead," and the Obama EPA is Hell-bent of outlawing its use.

IF - and it's a big if - Shell's product (or some other candidate formulation) gets approved by the FAA as a fungible replacement for 100LL, then the legacy fleet can fly on. If not, then we're going to see a brief drop in the price of beer cans - probably some time in 2020.

Posted by: Thomas Yarsley | December 13, 2013 11:43 AM    Report this comment

I second Joel's comments regarding other potential users of high octane fuel and suggest the possibility of taking it one step further. The change from high octane leaded automotive fuels to lower octane unleaded automotive fuels in the early 1970s resulted in lower compression ratios and a loss of performance and efficiency. Given that higher compression engines are more powerful and efficient, it stands to reason that automotive manufacturers could get some of the desired fuel efficiency and performance gains by increasing the compression ratio of automotive engines. How much of an increase in efficiency and performance would be required to make it worthwhile is unknown. It is also unclear how much the public would be willing to pay for higher performance fuel if there was a commensurate increase in performance efficiency. I suppose the automotive industry would have to show an improvement in cost per mile. Of course this all assumes wide availability of this new "efficient" 100 octane unleaded automotive fuel. I suppose the vehicles may also have to be "backward compatible" such that if an owner desired it they could run the lower octane automotive fuel while giving up some performance/efficiency.

Anyway, if they had developed a high octane automotive fuel in the late 1970s (instead of redesigning automotive engines), maybe we wouldn't be in this predicament in the first place.

Posted by: John Helleberg | December 13, 2013 12:03 PM    Report this comment

This is depressing. There's not much else to say about it.

Posted by: John Ewald | December 13, 2013 12:47 PM    Report this comment

Surely if Paul Bertorelli can figure out that the future of 100LL-powered general aviation is grim and that it is a declining market, then Shell should know these facts too. Why would Shell spend the millions to create "100-no-lead" in the first place? What kind of return on investment are they hoping for? It's not logical.

Posted by: John Ewald | December 13, 2013 1:02 PM    Report this comment

Obviously, pilots in general suffer from that dreaded modern affliction, Affluenza. What else could explain our determination to keep the mic away from fat ladies, find solutions to higher fuel prices and study endlessly the nuances of fuels and engines and, for me at least, keep thinking there will be a renewed GA one day....is there a cure for this malady?

Or, maybe the 'senior moments' have just become an endless stream od consciousness...I'm not depressed, just confused. Thanks Paul.

Posted by: Dave Miller | December 13, 2013 1:09 PM    Report this comment

"The change from high octane leaded automotive fuels to lower octane unleaded automotive fuels in the early 1970s resulted in lower compression ratios and a loss of performance and efficiency. "

If that's true, why does my 4.6L V8 make more horsepower and get better fuel economy today than any comparably-sized engine of the 70s and 80s, all while running on regular 87-octane fuel? Obviously, there are ways to increase power and fuel efficiency with a lower-octane fuel.

"I suppose the vehicles may also have to be "backward compatible" such that if an owner desired it they could run the lower octane automotive fuel while giving up some performance/efficiency. "

Many of today's performance cars have engines that only generate full power with 89 or 92-octane fuel, but automatically scale back performance when run on 87-octane.

Granted, it's a little more difficult to maintain full power on a lower-octane fuel with a big-bore air-cooled aircraft engine than a small water-cooled automotive engine, but it seems some of the recent developments are starting to go that way. Doesn't do much for the legacy fleet that can't be STC'ed for mogas, but at least it might help for any future aircraft created.

Posted by: Gary Baluha | December 13, 2013 1:49 PM    Report this comment

"Why would Shell spend the millions to create "100-no-lead" in the first place?"

Why would Phillips rail avgas 1000 miles to California to compete with Chevron who makes it there rather than a simple exchange deal, which oil companies do all the time? MBAs move in strange ways.

Even in a declining market, the avgas business is still worth more than $800 million in revenues, with impressively healthy margins as refineries go. With the right business plan, it's possible to make money. My guess is it pencils out in the black.

Posted by: Paul Bertorelli | December 13, 2013 6:54 PM    Report this comment

I've been using 95 octane mogas for years on my Cherokee 140 powered by Lyc. 0320 with no problems. why not legalize its use on GA aircraft?

Posted by: leon delrosario | January 1, 2014 10:29 PM    Report this comment

I've been using 95 octane mogas for years on my Cherokee 140 powered by Lyc. 0320 with no problems. why not legalize its use on GA aircraft?

Posted by: leon delrosario | January 1, 2014 10:29 PM    Report this comment

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