Premium fuel prices

[gearman]

Wow, I just  filled  up and where reg.is $1.68, premium is $2.50. Never have I seen the spread more than this. What is happening?

[Moto]

I think it's just supply and demand. For years, at least around here in S. Wisconsin, it was always 10 cent steps between regular, mid-grade, and premium. This lasted for a long time after the price of gasoline got up above $2.50, meaning the percentage difference between the grades was getting smaller and smaller. Then, finally, the 10-cent rule was broken, and now there is a much bigger increment that varies over time.

So I think the real question should be why the stations persisted so long with the 10-cent rule, given that recent experience shows it wasn't necessary.

[nc43bsa]

It could also be a result of the rapid fall in the price of all grades of gasoline and the possibility that the premium in question is older; ie., it was delivered at a time when the prices of all grades were higher than when the regular was delivered.

[Chuck in Indiana]

The last time I looked (about a month ago) the one station that has no alcohol fuel was asking a 75 cents per gallon over regular.  I paid it, just to have good gas in the tanks over the winter.
I'm seeing about 40 cents extra for premium with alcohol, now. Bought regular for the Prius at $1.73 today at Costco.  Time to buy a gas hog.   

[George_S]

I still can't get over the fact that gas is $1.67 for a gallon and 12 ozs of hot chocolate is $2.25.

[Chuck in Indiana]

I still can't get over the fact that gas is $1.67 for a gallon and 12 ozs of hot chocolate is $2.25.

So's a medium coffee at a coffee shop. 

[Two Checks]

How about the price of a bottle of water?

[oldbike54]

I still can't get over the fact that gas is $1.67 for a gallon and 12 ozs of hot chocolate is $2.25.

 No .

 

So's a medium coffee at a coffee shop. 

 No no .

 

How about the price of a bottle of water?

 No no no .

 Some of you guys are gonna lose your Red Suspenders card 

  Dusty

[LowRyter]

filled with diesel for $1.60

[drlapo]

Regular is$2.09
Premium is $2.79

[Nic in Western NYS]

Wow, I just  filled  up and where reg.is $1.68, premium is $2.50. Never have I seen the spread more than this. What is happening?

Wondering the same thing.  It seems the spread is far wider than ever.  Fluctuations in crude prices in either direction seem to be reflected very quickly in the price of unleaded but not in the prices for the higher grades.  Is the process for refining higher grades so costly that it masks price fluctuations?  Or is it that there is only one price point for competition, unleaded regular cash so the other products get a much higher margin and are not advertised.  Could it be that the rapid drop in crude left inventories of slower selling higher grades which need to be sold on markup based on the cost of crude when they were acquired for refining?  If so, these prices should drop soon.  If it's getting higher margin for higher octane gas while competing in a price war for regular, then that could continue.  Could someone with knowledge of the gasoline business weigh in on this?  To me it seems unlikely that it's just a difference in price elasticity between the commodity regular and the "boutique" higher octane grades because this would have resulted in similar big spreads in the past.

[Moto]

...To me it seems unlikely that it's just a difference in price elasticity between the commodity regular and the "boutique" higher octane grades because this would have resulted in similar big spreads in the past.

I think that there was a norm, or custom, or expectation, or habit, that each grade would be 10 cents more than the next lower one, and that this finally broke down when escalating overall prices made it unsustainable. That is, economic forces work separately on the different grades now, but didn't in the past.

However, I confess I'm a sociologist (though well versed in economics, FWIW).

[Rox]

It's over 3$ a gallon in California. Y'all canot sucks it..lol

[bad Chad]

I have been noticing premium running 65 cents more than regular in Chicagoland.

[Sasquatch Jim]

  Whatcha bitchin about?  Here it's regular 2.99

[Dukedesmo]

You should come over to Europe for appreciate how cheap your fuel prices are.

It's actually come down in price significantly here in England recently but the 'normal' 95 octane petrol (gas) is £1 (around $1.50) per litre which is around $5.70/US gallon.

The most I have paid was a few years back at £1.50/litre ($2.25) for (98 octane) 'super' which is around $8.50/US gallon...         

[Rough Edge racing]

 In western NY state, 87 octane E10 is about $2.00......E10 93 octane about $2.35 and  easy to find 91 octane non ethanol about $2.50-2.80

[Nic in Western NYS]

I think that there was a norm, or custom, or expectation, or habit, that each grade would be 10 cents more than the next lower one, and that this finally broke down when escalating overall prices made it unsustainable. That is, economic forces work separately on the different grades now, but didn't in the past.

However, I confess I'm a sociologist (though well versed in economics, FWIW).

That makes sense.  I wonder how that change happened.  Huge risk for the first adopter.  Set up for collusion.  I wonder if it's been studied (dissertation at least) or investigated.  I would be a lot more interested if my cars required premium.

[giusto]

I used to work in a gas station as a kid about..35 years ago

I know that sometimes different grade fuels were delivered at different times since regular gas always out sold mid grade or high test.. those deliveries would commonly lag. A very price conscious gas station owner would not adjust the price down until his sales records indicate his initial delivery quantities were near extinguished before dropping to a lower price relative to a newer lower priced delivery.

that said I live in an area where for at least 6 months a year (high volume tourist season) the price of gas always goes up on Thursday night and back down on Monday morning...not sure if that's exactly legal but it happens.

[Wayne Orwig]

Luckily all of my Guzzis run on the cheap stuff. I don't over pay for the high price ripoff.

[lucydad]

Shell premium here in Sugar Land, TEXAS is around 2.40, and I have seen basic lower octane as low as 1.57.  Yes, a huge spread.  No idea why even though I worked 40 years in upstream, exploration.  However, the crude input, local demand, distance to market, and refinery upgrades and repairs do have an impact.  The crack spread is a factor too (value added per barrel by refineries cooking crude oil batch into final sales products). 

Crude prices have collapsed.  Also world wide demand is a factor, and crude in storage (record right now) and production (very high in the USA, but dropping, extremely high overseas).  Commodities also get involved with politics and emotions on a world wide basis.  We enjoy very low gasoline prices on the Gulf Coast due to proximity of both production and refining, and transportation.  California and many other states have higher prices due to lack of refineries.  Local taxes are a big factor, also.

[bad Chad]

Seems fairly clear to me that the spread it what it is, simply because they have discovered people will pay for it.

If enough pressure were applied buy those of us who buy it, the spread would shrink.

[jbell]

I still can't get over the fact that gas is $1.67 for a gallon and 12 ozs of hot chocolate is $2.25.

Add 10% ethanol to your hot chocolate, that will make you feel better.   

My normal gas station is $1.79 reg, $2.69 premium.  Two blocks away it's $1.79 reg and $2.29 premium.  I've switched stations.

[George_S]

Add 10% ethanol to your hot chocolate, that will make you feel better.   

My normal gas station is $1.79 reg, $2.69 premium.  Two blocks away it's $1.79 reg and $2.29 premium.  I've switched stations.

Yeah, that's about what I see at my local BP. $1.79 reg. and $2.25 premium.

[ITSec]

When crude is as cheap as it is right now, vertically integrated producers (Exxon/Mobil and its kind) look to other layers of the process to create profit margins. The division that produces the crude is losing money, so the refineries and retail have to make up at least part of the difference.

The refineries make some of that back by keeping the cost of refined products higher than the barrel price of crude really justifies. Just to note, the cost of most other components of refined fuel are also down along with virtually all commodities.

The retail stores are squeezed - the public sees the news about 'cheap oil', and wants in on the game. The retailers respond to that, and to competitive pressure, by keeping the listed price of the high-demand entry fuel low - it lets them post an attractive price on that big sign. The price of other retail products is used to try to claw back some of those reduced profits.

[krglorioso]

Luckily all of my Guzzis run on the cheap stuff. I don't over pay for the high price ripoff.

My two "hydro" Stones will run cleanly on 87 regular but power is down noticeably and I quit that after I realized what was happening.  I gather the ECU senses approaching detonation and retards the spark to avoid problems, with related drop in power.

Here in San Diego area, Chevron unleaded regular is about 3.19/gal and premium 91 octane is 20c more.  Not such a big difference as in other geographic areas, where regular is very much cheaper than here, but the "bump" to 91 octane is monstrous. 

My 2003 Suzuki SV-1000 V-twin sport bike has 11.4:1 compression, runs fine on the recommended 87 octane.  Modern combustion chambers versus old 2-valve hemi designs, perhaps.

Ralph

[Nic in Western NYS]

Seems fairly clear to me that the spread it what it is, simply because they have discovered people will pay for it.

If enough pressure were applied buy those of us who buy it, the spread would shrink.

Right. THis is the price elasticity thing.  The theory therefore is that there used to be a convention of stepping up prices from unleaded through plus to premium at a pretty set interval (usually 10c).  Then some marketing whiz kid said, 'hey!  buyers of premium aren't as price conscious as buyers of unleaded regular, let's de-link and see how the prices float." 
I asked Uncle Google and he came up with these articles:
http://finance.yahoo.com/news/as-gas-prices-collapse--high-octane-fuel-fetches-unusually-fat-premium-150553933.html
http://www.cincinnati.com/story/news/your-watchdog/needtoknow/2015/06/03/premium-gas-getting-pricey/28416233/

The Yahoo Finance article cites supply/demand AND asserts that North American shale oil is harder to refine into premium than other oils.  So the more shale oil we get into our gas, the bigger the spread between low and high octane fuels we should expect.

The Cincinnati Enquirer article says that oil companies are investing a lot in high end additives like Shell's V-Power.  I thought Shell gas had V-Power in all grades though.  This article says that Shell was a leader in this high spread approach, though I've noticed it across brands.

[sib]

My gripe is about the pricing of the middle grade fuel.  I use 89 octane fuel in my V7II Stone.  If 87 octane is selling for $2.00/gal and 91 octane is selling $2.50/gal, I think that 89 octane should be halfway between these prices, $2.25/gal.  Instead, most stations in my area charge closer to the 91 price.  Why?  I'm often tempted to do 2 fillings, approximately half a tank with 91 and then fill it up with 87, and pay for both by credit card at the pump, so the seller has to pay 2 transaction fees.

[Kev m]

My two "hydro" Stones will run cleanly on 87 regular but power is down noticeably and I quit that after I realized what was happening.  I gather the ECU senses approaching detonation and retards the spark to avoid problems, with related drop in power.

Unless the Hydros are tuned to take advantage of the octane the difference is almost certainly in your head.

I've never seen any 1100 Cali with a knock sensor or any documentation that would suggest ION sensing ignition.

And certainly later models like my B11 had neither judging from how freely it pinged.

[Wayne Orwig]

My two "hydro" Stones will run cleanly on 87 regular but power is down noticeably and I quit that after I realized what was happening.  I gather the ECU senses approaching detonation and retards the spark to avoid problems, with related drop in power.

Nope, no such sensors in a hydro Stone.
Yes, it is your imaginations. Continue buying the extra octane that you don't need. Big fuel loves that.