Retail profit is low, but the petroleum companies are notorious for their control of their wholesale prices, and they don’t sell to all stations at the same price. It’s very fine-grained control based on local markets. I do not have a cite for this. This squeezes the gas station owners. Higher octane fuel is required by higher-performance cars, therefore more expensive cars, therefore higher-income owners. It’s almost like a luxury item, and luxury goods have higher margins. There is also low price elasticity; a car that needs high-octane fuel still needs it when the price goes up.
Thank you for your part in the war to preserve the past participle.
I’m curious: does that mean filling stations in higher-income areas are more likely to keep a large supply of premium (closer to, or even larger than, their supply of regular), stations in low-income areas keep much less premium on hand, and stations in middle-income areas and along expressways or interstates do something between?
I was surprised to find that almost 20% of current car models require 91 octane gasoline. Corvettes were the only ones I knew for sure but this list of 2016-2017 carsshows a lot more than I expected.
I’ll respond with a question: Why would the gaps shrink as the price of regular drops?
This thread seems to presume that the difference between regular and premium gasoline has something to do with the raw materials that go into the regular gas. But my presumption is that the premium gas contains additives and/or a more intensive manufacturing process, and these will not necessarily go up or down simply because the price of the regular gasoline went up or down.
High octane gasoline does cost more to produce, but not very much. It’s a constant balancing game between various industries using the products of oil refining. The refineries have to work out how much of the ‘octane’ additives to produce and how that affects the price of other oil based products, and what kind of oil to refine. But the actual difference in price at the pump after a few cents is primarily based on what people are willing to pay.
Our 2008 Nissan Murano required premium and neither it nor we were luxury items. Cost certainly mattered. But we were no longer commuters so the price didn’t kill us.
You all are kind of missing the point here; gasoline is like anything else sold at retail, and that means that its price is nearly entirely unrelated to its cost. At best, the cost represents a floor below which a seller can’t make any profit.
That’s why there’s a pretty consistent 20-30 cent difference between regular, plus and premium- it’s entirely a marketing/sales decision, not something driven by refining costs, etc…
I’d be willing to bet that your gallon of finished 93 octane gas is probably less than 10 cents more expensive than a gallon of regular sold at the same gas station, but they price it comparably with their competitors. I’d also bet that the regular gas is the least marked up.
In the case of a commodity good, which gasoline is, the price very much is reduced to the point that the difference between price and cost is (as others have stated) pennies on the dollar at best. If the retail price was so decoupled from the actual cost of production then there would be stations undercutting the others left and right until the excess profit was squeezed out. So the price difference between grades is very much is based on the cost of production, otherwise someone would be advertising how much less their premium grade is than the next guy, but they aren’t.
Now, we can certainly get into the distortions of this particular commodity market, such as the cartels, global markets, collusion, and price fixing. There’s certainly some of that going on which makes this not a pure commodity market. Nevertheless, this is nothing like clothing or personal electronics or home furnishings where the markup over cost can easily be 10x on some things, and still 2x or 3x between the wholesaler and final retailer. That’s just not the case for gasoline.
The numbers are high but that list, with just a few exceptions, is luxury and high-performance cars. I’m surprised to see Mini on there, VW Passat. The only Dodge is the Viper; the only Chevy is the Corvette. No Toyotas, Hondas, Fords, etc.
The numbers are high but that list, with just a few exceptions, is luxury and high-performance cars. I’m surprised to see Mini on there, VW Passat. The only Dodge is the Viper; the only Chevy is the Corvette. No Toyotas, Hondas, Fords, etc.
