The key difference between RBOB and CBOB is that RBOB gasoline burns more cleanly than CBOB gasoline.
RBOB and CBOB are two types of gasoline with additives/blends. These two forms of gasoline burn differently, which makes them useful in different applications. However, using either of these fuel types can reduce emissions of volatile organic compounds, carbon monoxide, and nitrogen oxides. These are pollutants that can form ozone. Moreover, RBOB reduces the emissions of some toxic pollutants.
CONTENTS
1. Overview and Key Difference
2. What is RBOB
3. What is CBOB
4. RBOB vs CBOB in Tabular Form
5. Summary – RBOB vs CBOB
What is RBOB?
The term RBOB refers to reformulated blendstock for oxygenated blending. It is a component useful in creating reformulated gasoline. Generally, reformulated gasoline produces a low amount of smog compared to other gasoline blends. This results in around 30% of the US market requirements of the gasoline reformulations.
The RBOB gasoline is listed on the Chicago Mercantile Exchange though it does not receive much investor interest in a similar capacity to that of crude oil futures. Generally, the prices of RBOB gasoline types have a high degree of correlation with crude oil because gasoline is distilled from crude oil. Therefore, some of the global supply and demand factors for crude oil apply to RBOB as well.
The RBOB gasoline crack spread allows us to trade the spread between the RBOB gasoline futures and Brent futures. This type of trading causes two separate positions in the underlying future legs where a long position in RBOB gasoline futures and a short position in Brent futures.
The introduction of higher blends of ethanol in gasoline in many countries in Europe has reduced the contribution of fossil fuels to the gasoline pool. In order to completely realize this, the chemical makeup of the blendstock can be adjusted to take out any additional oxygenates, allowing a higher proportion of ethanol.
RBOB gasoline has become the world’s most liquid gasoline futures contract because it is the only gasoline futures contract trading electronically around the clock.
What is CBOB?
CBOB stands for conventional blendstock for oxygenated blending. It is a common grade of gasoline that is formed from refineries, mainly in the USA. The name of this gasoline is derived because of its conventional grade of gasoline that is opposite to the reformulated grade having tighter environmental specifications.
This type of gasoline is intended to blend with oxygenates downstream of the refinery. Moreover, CBOB needs to become conventional gasoline soon after blending with oxygenates. Usually, gasoline in the USA additionally contains 10% ethanol. Similarly, conventional blendstock for oxygenated blending is a blendstock consisting of ethanol to get E10 gasoline.
What is the Difference Between RBOB and CBOB?
RBOB and CBOB are two types of gasoline that are useful due to their favorable properties. The key difference between RBOB and CBOB is that RBOB gasoline burns more cleanly than CBOB gasoline. In other words, burning RBOB gasoline emits a reduced amount of toxic pollutants and other types of emissions compared to CBOB gasoline. Moreover, RBOB is more expensive than CBOB.
The below infographic presents the differences between RBOB and CBOB in tabular form for side-by-side comparison.
Summary – RBOB vs CBOB
The term RBOB refers to reformulated blendstock for oxygenated blending, while the term CBOB stands for conventional blendstock for oxygenated blending. In conclusion, the key difference between RBOB and CBOB is that RBOB gasoline burns more cleanly than CBOB gasoline.
Reference:
1. “RBOB Gasoline Overview.” Futures & Options Trading for Risk Management – CME Group.
2. Edwards, John. “4 Factors You Didn’t Know about RBOB.” Investopedia.
3. “RBOB Gasoline in Driving Seat for Global Ethanol Push.” CME Group.
Image Courtesy:
1. “Gasoline / petrol / fuel can” (CC0) via Free SVG
2. “Portable gasoline containers” By BrokenSphere – Own work (CC BY-SA 3.0) via Commons Wikimedia