By Paul Millner
We all love to fly. But, for most of us, the amount of flying we can accomplish each year is limited by our finances.
So although many of us are optimistic about the benefits of the oncoming unleaded avgas—cleaner spark plugs and cylinders, longer oil change intervals, the possibility of benefiting from special aviation-formulated full-synthetic motor oils and oxygen sensors, and environmental benefits—we are of course concerned about what the cost implications might be.
The general aviation industry understands the issue regarding the removal of lead from avgas, and is committed to doing so safely, economically, practically, and efficiently. As the development and certification of unleaded avgas has progressed, many pilots have expressed concern about avgas pricing. I’d like to present a bit of history on how avgas pricing has developed over time, and how it’s likely to move in the future.
Historical pricing. Pricing is market-driven, not cost-driven. This misunderstanding is complicated even by the pronouncements of the companies developing unleaded avgas fuels. Certainly, a fuel that sells below replacement cost is not a long-term sustainable situation. But the history of petroleum product pricing is full of examples of prices that don’t seem to make sense, because they are driven by larger marketplace concerns.
Let’s begin by discussing the value of alkylate, the primary component of both leaded and unleaded avgas. Alkylate is synthesized from the byproducts that make less desirable heavy oil into the gasoline, jet, and diesel that people want to buy. This alkylate can then be distilled to create aviation alkylate for use in either 100LL or a 100-octane unleaded fuel (100UL).
Avgas cost is driven up by the value of aviation alkylate. Every one gallon less of avgas sold frees up enough alkylate to upgrade three gallons of conventional gasoline to higher-value reformulated gasoline, which is required in larger, smoggier markets in the United States. So out the refinery gate, avgas cost has to compete with the upgrade difference between conventional and reformulated mogas (motor gasoline, used in automobiles), times three. The components of avgas also have an octane premium. In the United States, the mogas pump at your neighborhood gas station is labeled with the AKI (anti knock index) or pump octane. This number comes from different octane scales than aviation octane. 100LL would be about 105 AKI if sold at the gas station. Since there’s a differential in price between 87 AKI regular mogas, and 92 or 93 AKI premium mogas, octane index has a value. The 12- to 18-octane point advantage of each gallon of avgas over mogas could instead be used by the refiner to upgrade three gallons of regular to premium, so that too represents an opportunity cost of making avgas.
So, that’s the refiners’ disincentive for making avgas (plus liability, the cost of the specially coated tanks required for storing avgas to avoid rust contamination, the cost of segregated avgas handling facilities, and more). The upside for the refiner is that avgas sells at the refinery gate at about 80 cents per gallon more than mogas. This is a nice margin, compared to the usual 4 cents per gallon mogas margin at the refinery gate.
How have wholesale avgas prices varied over time? The biggest driver is the price of crude oil. That affects the cost, and market valuation, of every constituent being manufactured in the refinery. Over the past five decades, marker crude oil prices have ranged from 5 cents per gallon to over $2.50 per gallon, back and forth. If you look at the Energy Information Administration website, you’ll see that petroleum products follow that cost curve fairly linearly—there’s no non-linear multiplier effect. It’s simply the cost of crude, plus cost of refining, plus margins that vary with scarcity or oversupply of product in the marketplace. This is at odds with uninformed speculation that if 100UL costs 50 cents per gallon more to make, then the retail price will be a factor of four (or some other made-up number), causing avgas prices to rise by $2 a gallon. That’s not likely to happen, at a constant crude oil price.
Formulation effects. How will the change in formulation from 100LL to 100UL affect costs, and hence blenders’ willingness to manufacture? All the proposed formulations currently being worked continue to use aviation alkylate as the primary component. Today, 100LL also includes an aromatic component, say 10 percent to 20 percent, some isopentane or similar material to at least meet minimum vapor pressure (less than 10 percent of the blend), and the additive package: tetra-ethyl lead (TEL), antioxidant, lead scavenger, and more. Aromatics are a class of compounds like benzene, toluene, and xylene, that enhance the octane rating and energy content (or miles per gallon) of the gasoline. Unleaded avgas will have an additive package as well.
Some have theorized we’ll save a lot of money not adding lead to unleaded avgas. Not so. The lead package in avgas typically costs 5 cents to 15 cents per gallon, so that’s not enough to make a significant impact.
General Aviation Modifications Inc. (GAMI) has obtained patents for its STCed 100-octane unleaded avgas that suggest instead of adding toluene, it will be adding the next heavier aromatic than toluene, which is xylene. Which isomers in which concentrations appears to be a GAMI trade secret, but the marketplace is awash in different isomer blend concentrations, and GAMI says it can use several of the commercially available blends to make GAMI 100 unleaded.
It’s not clear if Swift Fuels still plans an aromatic component in its unleaded 100 octane fuel. Swift says its 100R (renewable, because of the ETBE content, made from ethanol) will be of comparable cost to 100LL. GAMI says that its GAMI 100UL will have a cost-of-goods-sold of 60 cents to 80 cents per gallon more than 100LL. But, does this mean the pump price will be higher? In a word, no.
Competition in the marketplace: The petroleum marketplace is a competitive place. And a product like avgas, with an 80-cent-per-gallon margin, offers potential for those in the market to compete away at least some of that high margin. Historically, that is what has happened to almost every new product or process over time, to the consumers’ benefit. The current 100LL infrastructure is tied to old refineries that have been blending lead since the 1920s and therefore already have a large lead environmental clean-up liability. The requirement for lead in 100LL has discouraged new entrants to the avgas market; no company (nor their insurers) wants to take on a lead liability. However, with the onset of unleaded avgas, many blenders could enter the market to enjoy some of that high margin without taking on a large environmental liability. And competition generally leads to lower prices. So, at introduction, 100UL might be priced higher; but market forces could well reduce that price increment over time. Certainly, if Swift Fuels 100R comes to market at a par to 100LL, GAMI 100UL would have to compete.
Refining industry trends: The primary component of either our current 100LL or the new 100UL is aviation alkylate. But that requires special equipment in a refinery, and it’s very difficult to justify that maintenance expense and investment for our comparatively small demand. (In 2020, 15 out of every 10,000 gallons of gasoline made in the United States were avgas.) The good news is that in years past, the industry invested in special equipment to make MTBE, a mogas oxygenate additive. That additive was outlawed because it disproportionately contaminated ground water, but it turns out that the equipment and plants built to make MTBE are easily adapted to manufacture aviation alkylate, which does not have that disproportionate effect on ground water. Most of that ad hoc alkylate product goes to mogas blending today, but it could easily be diverted to higher value avgas blending without adversely affecting the much larger mogas market.
Challenges. GAMI is beginning its final 150-hour endurance run prior to the FAA adding all the remaining higher compression and turbocharged engines to the STC. The original plan was for that to happen second quarter of 2022, but new dynamics between the EPA and FAA on outlawing lead in gasoline could cause some delays; hopefully not. Swift Fuels forecast last year that it would have its STC in the 2022/2023 time frame. Phillips 66/Afton Chemical (one team) and Lyondell Chemical/VP-Racing (the other team) are both working through the FAA’s Piston Aviation Fuel Initiative (PAFI) process to obtain certification, but that’s viewed as a longer process, perhaps 2025 or 2026. But even the first of these, say GAMI, has a lot of work to accomplish after certification. Working with existing 100LL providers, as well as possibly new market entrants, commercial terms and conditions have to be negotiated; blending agreements will have to be put in place; the supply chain will require re-alignment, and the supply chain is ugly these days; rail versus waterborne transportation issues will have to be worked out for different locations, as well as cost engineering on imported versus self-manufactured components. None of this is terribly difficult, but it all takes time and talent, and it’s difficult to arrange commitment of either prior to FAA certification. So, at best, we might see some 100UL entering the market in a few specific locations by the end of this year. But broader adoption and distribution to all the airports where we see 100LL now will take years.
Bottom line. 100UL avgas is coming. Pricing shouldn’t be dramatically different than today. But some different market price factors will affect 100UL than affect 100LL today. The relative ease of blending unleaded avgas compared to leaded avgas may lead to more market competition, and we will all benefit from that.
Paul Millner, co-founder of the Cardinal Flyers type club and a 5,000-plus-hour private pilot, spent 38 years as an engineer for a major oil company; his last decade there, Millner was manager of business development, and directed unleaded avgas development efforts.