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Thursday, October 21, 2021

Fuel shortage: could switching to UK E10 petrol be the underlying reason?

Fuel shortages have wreaked havoc on the forecourts in the UK in recent days, leading to long queues and the closure of many stations. The main reasons being cited in the media are too few lorry drivers to replenish forecourt stock, coupled with temporary spikes in fuel demand, fueled by panic-buying.

Undoubtedly, these factors have contributed to the disruptions. But merely pointing to driver shortages or short-term fluctuations in fuel demand does not fully explain the situation. There has been no significant change in the number of drivers from August to September and the sector has handled periodic demand surges well in the past. Usually only 1% of petrol stations run out of fuel.

So how could a distribution system that normally works so well, suddenly have a dramatic increase in stations running out of stock, with fuel inventories almost completely exhausted in most networks? We suspect that two other factors provide a more complete explanation, but this has gone unnoticed: the recent move to E10 petrol – the new greener blend containing 10% ethanol – and less than usual in preparation for the forecourt switch. Works with fuel stock.

E5 and E10 Petrol

The standard 95 octane petrol grade in the British forecourt became E10 on 1 September. About 95% of petrol cars can use the E10 grade. Older cars are advised to continue using E5, which contains up to 5% ethanol and replace the premium (97+ octane) grade in the forecourt in 2019.

A large majority of fuel retailers have opted to sell only the E10. For example, none of Asda’s 320 petrol sites – about 8% of the network in terms of fuel sold – are supplying E5. For BP, which has 1,229 stations or 15% market share, E10 has become the standard grade, with E5 only available at certain sites. Meanwhile, about 200 of Esso’s 1,200 petrol stations (12% of the market) are no longer selling E5.

At the same time, average petrol stock levels at fuel stations in England fell from 38.8% in the March to May 2021 period to 35.7% for June to August. Petrol stations may be reducing the old 95 octane grade fuel stock before refilling with E10. Some petrol stations may be running with lower fuel capacity than before and require more frequent and initially larger refills as they adjust to the new normal.

Some forecourts may also find it a challenge to switch to the E10. Ethanol absorbs water in a way that petrol does not, so fuel storage facilities need upgrades to ensure they are waterproof, as water can damage motor engines.

Ethanol can also corrode some forecourt materials such as rubber, requiring more refurbishment. Big retailers are likely to be prepared for this job, but it’s hard to determine how smaller players prepare for the Switch. As a result some may not have their normal fuel capacity now.

Not so super after all.
Image Broker/Alami

On the demand side, the fuel economy is not as good for the E10 as it is for the 95 octane. Motorists using the E10 can expect a 2%-3% reduction in miles per gallon, which may be further influenced by driving style, so they have to refuel more often.

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In short, many stations will experience varying supply and demand. Stations still selling E5 may face higher-than-normal E5 demand. E10 sellers will likely be dealing with an unexpectedly high level of E10 demand, both because drivers are switching from E5, and because they will refuel slightly more frequently. These changes may each be small, but are correlated. In combination, they are likely to have a major impact.

Changes in demand affect replenishment schedules for petrol stations, but with lorry drivers operating near full capacity, there is little room for flexibility. And when one station runs out of stock, motorists travel to neighboring stations, depleting their stock faster than expected. So the shortage gets worse, which is reported by the media, and consumers panic buying.

If our analysis is correct, it raises the question of why there has been no discussion about the role of the E10 change so far. Significantly, there are echoes of what happened in Germany a decade ago. Germany introduced E10 fuel but consumers were reluctant to buy it, believing it would damage their cars. Premium fuel sales accelerated, resulting in exhaustion of premium fuels and overstocking of unsold E10s, forcing refineries to reduce E10 production accordingly.

problem solving

We believe that a bathtub analogy is a useful way to understand how current reduction occurred. Bathtub fuel stations have capacity. The tap represents fuel trucks, and the plug hole represents the demand for petrol. There is currently limited fuel at the stations so the bathtub is (almost) empty. Stock levels act as a buffer against fluctuations and uncertainties in supply and demand, but we can only raise levels if we can rapidly bathe in the rate at which it is being drawn out.

Opening the tap means more and more rapid fuel delivery in the courtyard. Emergency shipment by army will help. Long-term solutions would include incentivizing lorry drivers with better remuneration and better working conditions.

Latest media reports indicate that the situation may ease. However, further setbacks cannot be ruled out. Measures to temporarily restrict demand include:

  • fuel rationing – eg £30 max spend;
  • limiting queue length, number of pumps open and opening hours;
  • Fuel prices fixed across the country to meet demand;
  • encouraging work from home, car-pooling or the use of public transportation;
  • Prioritizing fuel for emergency workers and/or work vehicles;
  • Discouraging non-essential travel.

Measures should be carefully selected and implemented and not necessarily in all petrol stations. More targeted industry-wide and government-led actions may be needed if the situation does not stabilize.

The E10 petrol rollout in Northern Ireland, where there has been no disruption in fuel supply, is scheduled for early 2022. Hopefully this analysis will help them avoid the same fate as the rest of Britain.

This article is republished from – The Conversation – Read the – original article.

World Nation News Deskhttps://www.worldnationnews.com
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