Premium Gasoline Rally Threatens to Burn Luxury Drivers

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Refinery outages and rising demand have spurred a rally in wholesale premium gasoline prices from New York to the Gulf Coast that’s threatening to sting luxury car drivers at the pumps.

Spot 93-octane gasoline in the Gulf Coast jumped 2.38 cents a gallon on Thursday to 31 cents above futures traded on the New York Mercantile Exchange, its highest level since November, data compiled by Bloomberg show. The premium fuel reached a five-month high in New York Harbor this week, surged to 46 cents a gallon over futures in the Midwest and gained to the most since December in Chicago.

Premium gasoline is getting more expensive as demand hovers at the highest seasonal level in almost a decade and refiners perform unplanned repairs on units key to blending the fuel. The rally threatens to boost pump prices even higher amid the peak summer driving season.

“I’d imagine this rally is due simply to demand increasing for premium and a number of catalytic crackers shut down that help produce the blendstock,” Andy Lipow, president of Lipow Oil & Associates LLC in Houston, said by phone Thursday. “There simply aren’t enough replacement barrels available promptly.”

The fluid catalytic cracker at PBF Energy Inc.’s refinery in Toledo, Ohio, shut late last month for about two to three weeks of unplanned repairs, a company statement shows. Exxon Mobil Corp.’s Joliet plant in Illinois was restarting its own cracking unit on May 29 after a breakdown earlier that month, according to energy data provider Genscape Inc.

Increasing Demand

Conventional premium gasoline sales rose to 20 million gallons a day in March, the most for that month since 2005, Energy Information Administration data show. Reformulated premium gasoline demand is also at a nine-year seasonal high.

“It’s very clear that the trend from the engine manufacturers is they’re producing cars which are more developed and therefore needing premium fuel,” Istvan Kapitany, Royal Dutch Shell Plc’s executive vice president for global retail, said in an interview in New York on Tuesday. “That’s the reality we’re in.”

Premium gasoline at U.S. pumps has already risen almost 35 cents a gallon in the last two months, averaging $3.152 nationally yesterday, data compiled by the Heathrow, Florida-based motoring club AAA show. The difference between regular and premium gasoline is the biggest for this time of year since 2008.

Station owners are enjoying high margins on premium gasoline, giving them less incentive to raise prices, AAA spokesman Michael Green said.

“But buyers of premium gasoline should watch out,” he said. “If wholesale prices remain high for long enough, it may become more expensive for them.”

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