This Week in Petroleum:
Growing octane needs widen the price spread between premium and regular gasoline
In late 2016, the difference between U.S. average retail prices for premium and regular gasoline reached 50 cents per gallon. This price spread has been generally expanding since 2000, and the rate at which the spread has grown has accelerated over the past three years (Figure 1). Many factors on both the supply and demand sides are likely influencing this trend.
On the demand side, since 2013, the premium gasoline share of total motor gasoline sales has steadily increased, reaching a near 13-year high of 11.9% in August 2016. While lower gasoline prices may be supporting demand for premium gasoline, the upward trend in sales is more likely driven by changes in fuel requirements for light-duty vehicles in response to increasing fuel economy standards. To meet these standards, more car manufacturers are producing models with turbocharged engines that may require or recommend the use of high octane gasoline.
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