Making the Grade Gap on Gas Prices

Difference between regular, premium expands to nearly 40 cpg

Published in CSP Daily News

Gas grades (CSP Daily News / Convenience Stores / Gas Stations)

CHICAGO -- The days of a dime spread between the prices of regular, midgrade and premium gasoline may be over. A recent analysis by GasBuddy.com finds the "grade gap" between regular and premium approaching a record 40 cents per gallon (cpg).

In a recent blog post, GasBuddy senior petroleum analyst Patrick DeHaan noted that falling demand for premium gasoline and less production has boosted its prices.

According to the U.S. Energy Information Administration (EIA), the national price of premium gasoline averaged $4.014 per gallon in the week ending May 26, 2014, with the price of regular at $3.674 per gallon, or a 34-cpg spread.

The EIA had reported earlier that the grade gap reached 30 cpg for the first time at the end of 2012, and kept that spread for much of 2013. It noted that on a percentage basis, however, the gap has held relatively steady since mid-2009, citing the blending of more ethanol into gasoline as a source of octane as a reason for the stability. This has helped decrease production costs for premium gasoline, since refiners can cut the octane levels in the premium blendstock, which is blended with ethanol to create finished gasoline.

A two-decade decline in premium gasoline consumption, however, has made the fuel less price-competitive with gasoline as refiners scale down production. As DeHaan noted in an earlier post about the widening grade gap, "The drop in production likely means premium is becoming more of a specialty fuel and subject to additional pricing volatility as less supply is produced."

Click here to view the full GasBuddy blog post.

Brooklyn Park, Minn.-based GasBuddy, a division of Oil Price Information Service (OPIS), Gaithersburg, Md., operates consumer-focused websites and smartphone apps that track gasoline prices at more than 140,000 gas stations in the United States and Canada.