Does premium really cost more than regular?

[Leviosaurus]

Sorry for my part in the hijack, Jet. It was an interesting question - I’d like to see it back on track too.

[samclem]

Since it is beyond the ability of many posters on this board to keep to the subject at hand, I’ve moved this one to Great Debates.

People, is it that hard?

samclem GQ moderator

[Enderw24]

@samclem

Since it is beyond the ability of many posters on this board to keep to the subject at hand, I’ve moved this one to Great Debates.

People, is it that hard?

samclem GQ moderator

The subject at hand is indeed hard. Though it greatly fluctuates depending on the grade of oil I use.

[Malacandra]

@groman

Maybe I can elaborate. A lot of people believe that oil would somehow become a renewable resource and all our problems would be solved if we just folded ourselves into ugly tiny useless cars that get 30% better gas milleage instead of buying whatever we actually like to drive. :rolleyes:

I just do not know where to begin with that last sentence, except maybe to sympathise with groman over his irrational fear that some mean-spirited individual wants to see him all scrunched up like Bob Parr in his weenie car. :rolleyes:

[Driver8]

@Malacandra

I just do not know where to begin with that last sentence, except maybe to sympathise with groman over his irrational fear that some mean-spirited individual wants to see him all scrunched up like Bob Parr in his weenie car. :rolleyes:

Welll, he’s right. That’s the only thing that keeps me going in the morning! I recommend an old Mini. And clown uniforms.

Somehow Groman has managed to completely miscategorize the argument for higher prices. Typically, it is the belief that oil is not a renewable resource that drives this argument. Higher prices now would increase the profitability of research into other energy sources, which could dramatically lessen the impact of even higher prices in the future.

I think the market should let the prices go where they have to go. Price controls are a terrible idea and would probably just lead to temporary shortages with a larger impact on the economy than the higher prices would have had in the first place.

And Groman, you’d still be able to drive whatever you want. Just make sure you can afford to fill it up

[groman]

I apologize. It’s just people who “wish for $8 a gallon now” are usually the same type that can’t grasp why someone would feel their Honda Civic Hybrid is one of the worst cars ever designed. I just recently did the math and I spend 10% of my life in my car, and it should at the very least beat first class airplane seats in terms of comfort and space.

Frankly, I don’t know if gas will EVER be $8 a gallon. That would mean almost $9K a year in gas for me. This creates a market niche: Just a WAG, but I’m sure you can convert almost any car to run on pure ethanol for less than $9K. Also a WAG, but ethanol should not be $8 a gallon, just because it’s historically always been cheaper than gas.

[Driver8]

Well, I certainly don’t wish gas was $8 a gallon, but I am one of those people who doesn’t see the Honda Civic Hybrid as the worst designed car. Unless it is radically different from the standard Honda Civic (which is what I drive).

I don’t have any issue with people driving bigger, more luxurious cars. In fact, if it weren’t for the fact that I bought my car five days into the US with no credit history, I would have splashed out a bit more. The price of gas is a pretty insignificant part of my budget and would have to increase dramatically for me to be concerned.

[shelbo]

@groman

I apologize. It’s just people who “wish for $8 a gallon now” are usually the same type that can’t grasp why someone would feel their Honda Civic Hybrid is one of the worst cars ever designed. I just recently did the math and I spend 10% of my life in my car, and it should at the very least beat first class airplane seats in terms of comfort and space.

Frankly, I don’t know if gas will EVER be $8 a gallon. That would mean almost $9K a year in gas for me. This creates a market niche: Just a WAG, but I’m sure you can convert almost any car to run on pure ethanol for less than $9K. Also a WAG, but ethanol should not be $8 a gallon, just because it’s historically always been cheaper than gas.

I don’t know about ethanol, but you can convert just about any car to electric for between $5,000 and $20,000.

http://www.electroauto.com/

[groman]

@shelbo

I don’t know about ethanol, but you can convert just about any car to electric for between $5,000 and $20,000.

http://www.electroauto.com/

We just don’t have the battery technology available to drive a 100 - 200 KW car with any kind of range. Maybe when fuel cells mature…

[Leviosaurus]

@Driver8

Well, I certainly don’t wish gas was $8 a gallon, but I am one of those people who doesn’t see the Honda Civic Hybrid as the worst designed car. Unless it is radically different from the standard Honda Civic (which is what I drive).

I don’t have any issue with people driving bigger, more luxurious cars. In fact, if it weren’t for the fact that I bought my car five days into the US with no credit history, I would have splashed out a bit more. The price of gas is a pretty insignificant part of my budget and would have to increase dramatically for me to be concerned.

I’m six foot seven (two meters). None of the hybrids currently available can fit me, with the possible exception of the Ford Escape. I’d love a more fuel efficent low emissions vehicle, but it just isn’t an option for some of us currently.

I researched hybrids when an ex GF was considering buying a new car. My conclusion: Hybrids don’t save you any money, and possibly lose you more. There was even a thread on it here. What we really need is for fuel cell technology to mature.

[Magiver]

@Jet Jaguar

No matter what the price of regular gasoline is, there is always a fixed 10-cent price jump between grades. But if premium is more expensive to manufacture, then shouldn’t the increase in the price mirror the percent increase for regular also?

For example, way back when regular was $1 per gallon, premium was $1.20, or 20% more expensive. Today at $3 per gallon, it’s $3.20, or less than 7% more. Shouldn’t premium be more like $3.60 per gallon, if it’s really worth that much more?

Does the price reflect actual costs, or is it merely a percieved value in the minds of the consumer?

Supply and demand above the minimum profit margin. If there are differing demands for different supplies then the fluctuations will not be synchronous.

With that said, demand for premium is often perceived value because not all car owners who purchase it need it. If gas stations tack on 10 cents automatically I would say it’s done so on the premise of perceived value.

[groman]

Also I just thought of something interesting.

There are two main types of people who buy premium:

1. With high compression cars that need it
2. That feel that it’s somehow better(performance, reliability, etc.) for their regular-compression car that is meant to run on regular.
   Premium will cost more than regular because, duh, it’s premium, people will pay more. However, the people in group #2 might stop buying premium and buy regular if the price difference is big enough. So by all laws of economics, the price difference between regular and premium should settle in the maximum profit zone where enough people from group #2(probably a much larger group) buy premium to offset the loss of not jacking group #1 with an extremely high price.

[smiling_bandit]

I, along with a lot of other people, would be happy to have more fuel-efficient cars. No skin off my nose…

…assuming, of course, that someone else pays for the thing. I’m not made out of money.

[JohnT]

@Abbie Normal

You’re wrong.

Thats record profit, that means after they lost $100 million “just like that”.

Yawn. So what? They’ll also pay over $25 billion in taxes and other duties this quarter as well, for an effective 41% tax rate. (which doesn’t include any taxes paid by shareholders for dividend income).

From the latest 10-Q, filed 8-4-2005:

Income, excise and all other taxes for the second quarter of 2005 of $23,846 million were up $3,100 million compared to 2004. In the second quarter of 2005 income tax expense was $5,119 million and the effective income tax rate was 41.4 percent, compared to $3,690 million and 40.5 percent, respectively, in the prior year period. Excise and all other taxes and duties were higher reflecting higher prices and foreign exchange effects.

---

Income, excise and all other taxes for the first half of 2005 of $47,071 million were up $5,534 million compared to the prior year. First half 2005 income tax expense was $10,162 million and the effective income tax rate was 41.3 percent, compared to $7,212 million and 41.1 percent, respectively, in the prior year period. During both years, the Corporation continued to benefit from the favorable resolution of tax related issues. Excise and all other taxes and duties were higher reflecting higher prices and foreign exchange effects.

Note the final line: Exxon pays more taxes the higher the price of oil rises. Even though they got a few favorable rulings from the tax judge, they’re still paying over $94 billion in taxes on $200 billion in sales! That’s 47% of their income!

It’s not as if the government isn’t getting her share of the XOM pie.