Over the past five years, the price differential between regular and premium gasoline has been widening steadily. According to the Energy Information Administration (EIA), as of July 2017 the premium -vs.-regular differential reached $0.53/gallon — more than double the differential in 2012. This has produced cringe-worthy experiences at the pump for consumers requiring the premium grade and an incentive for refiners to optimize the gasoline pool. Consequently, refiners have been making operational adjustments and capital investments to squeeze additional high-octane components out of their feedstocks. Today we examine the premium-regular gasoline differential, provide a primer on gasoline blendstocks and octane levels, and discuss some contributing factors to the widening divide between the pump prices of 87- and 93-octane gasoline.
Between 1995 and 2007, the price differential between premium gasoline and regular gasoline at the retail level hovered around $0.20/gal — an amazingly stable run for the often wild-and-woolly commodities world. The $0.20/gal differential and the six octane-number spread between premium (93 Anti-Knock Index, or AKI) and regular (87 AKI) resulted in an octane value of $0.033/gal (20 cents divided by six octane numbers) or $1.40/bbl (3.3 cents times 42 gallons in a barrel) per octane number. From 2007 to 2012, the differential crept up slightly to around $0.25/gal, but since then it has been on a steady rise, as shown in Figure 1. Over the past 12 months, the premium-vs.-regular price spread at the pump has consistently exceeded $0.50/gal (more than $3.50/octane-barrel). At the bulk, or spot, point of sale, the same general trend can be seen, except that the increase begins a bit sooner (circa 2004-05), possibly driven by the phase-out of methyl tertiary butyl ether (MTBE) from gasoline, and the absolute price spread increase has been lower. Over the past two years, the premium price spreads at the pump and spot points of sale have been diverging, with retail maintaining high spreads.