Car and Driver: Why Does Premium Gas Cost So Much More Than Regular?

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From the July 2016 issue

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From 1995 through 2005, the national average price difference between regular and premium unleaded was 18 to 19 cents per gallon. Even when gas dropped ­below a dollar in 1999 or broke the three-dollar mark in 2005, the premium for premium remained consistent. It ticked up some over the next few years, with the delta growing to 25 cents by 2011. But since then, the price of high-test has been on a tear. The average upcharge reached 40 cents in 2015; this year it’s already grown to 47 cents.

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The cause of this widening gap is a combination of factors, according to Patrick DeHaan, an analyst with GasBuddy.com. An increasing number of cars require premium, the share growing from 20 percent in 1996 to 50 percent today. But the refining industry is still mostly geared toward producing regular-grade gas, particularly in the Midwest, leading to a shortage of both high-octane blendstock and alkylate, an octane booster. New marketing efforts by oil companies have also raised prices.

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The price spread between regular unleaded and Shell’s V-Power Nitro+ premium at our local Ann Arbor, Michigan station is a whopping $1.10.

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If there is a silver lining here, it is that even with premium priced 40 to 50 cents more than regular, some unwary gas stations have been selling higher-octane gas below cost. Earlier this year, DeHaan says, stations in the Chicago area were paying as much as a dollar per gallon extra for premium without raising prices. “Not many small stations look at the premium number,” he says. “They don’t sell a lot of it.”

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Every silver lining’s got a touch of gray, however, and DeHaan predicts that retailers are going to continue to raise prices for premium until demand drops or production capacity catches up. “It may get worse before it gets better,” he says.

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