Photographer: David Paul Morris/Bloomberg

markets

No Relief in Sight for Gasoline Guzzlers Filling Up on Premium

Updated on
  • Price difference for high-octane gasoline will increase: PBF
  • Demand, regulations are tightening supplies of premium fuels

The priciest U.S. gasoline may only be getting pricier.

Since March 2017, filling up your car’s 20-gallon (75-liter) gasoline tank with premium has cost at least $10 more than if you’d pumped regular. The widening spread has been driven by additional demand for the fuel and by tightened air rules that have reduced supply.

Those conditions are probably going to get worse, according to Tom Nimbley, chief executive officer of refinery owner PBF Energy Inc.

“Do I expect octane to widen out? Yes, I do,” he said on a conference call Feb. 15.  

Tier 3 gasoline guidelines that began last year require refiners to make fuel with lower sulfur content. U.S. facilities have a grace period -- if their fuel is still too high in sulfur, a credit can be purchased to comply with the rule. As the credit bank runs dry and the system is eventually phased out, premium gasoline prices will probably rise, Nimbley said.

U.S. premium gasoline will average $3.07 a gallon this year, while regular will cost $2.61, according to government estimates, steady from last year.

In addition, demand for premium is rising as carmakers install more engines that require the fuel, according to Matthew Blair, head of chemicals and refiners equity research at Tudor Pickering Holt & Co. in Houston.

“Auto manufacturers are turning more and more to small displacement, high compression turbo engines to meet fuel economy standards while also providing good performance,” he said.

General Motors Co., the largest U.S. carmaker, requires premium fuel in 8 percent of its vehicles, according to the company.

“We think there’s a solid case that octane spreads will widen going forward,” Blair said.

— With assistance by David Welch

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE