Confusing Gas Pricing
 

Ok here is something that I have noticed that doesnt make sense to me.

Back in the day of $1.00/gallon regular gas premium was priced around here at $1.20, 20 cents higher than regular.

Now in the days of $3.50 regular gas, premium is priced around $3.70, again 20 cents higher than regular.

It seems to me that if regular gas is three times more expensive than premium should be as well, and we should be seeing more of a 60 cent/gallon differential.

This confusing to anyone else?

Shhhh! Don't give 'em anymore ideas on how to artificially jack up the price of gasoline!



Your mistake is that you're trying to put logic into the pricing of this commodity.

In Houston it was a 20 cent difference as far back as I can remember. Over the last year they've slowly moved it to about 25 cents.

The rip off is the mid grade. It's priced right between regular and super but it's not a 50/50 mix :o

The pricing of gas isn't logical, it is driven by the supply and what the market will bear. In this case high octane distillates and blend stocks which are used to make premium.

Now, what will the market bear? People are already pissed at the high prices and having premium significanty higher than that will just be too much, so the station owners don't want to push their luck.
A few years ago premium was only about 5 cents more expensive than regular on the wholesale market but the station owners jacked up the price and made a much higher margin on premium. Today, premium costs about 21 cents more than regular on the wholesale market ($2.85 vs. $2.64 US average). The station owners are actually making a smaller margin on the good stuff than they used to, because most of them just don't have the guts to stick it to the consumer any more than thay already are.

Yep, the average wholesale price of premium is around $2.85 a gallon (data is a few weeks old, it might be slightly higher by now). The price for a gallon of light sweet crude is about $2.70 a gallon. add to that the cost of refining that crude and there isn't very much left over as profit.

Take the wholesale price and add to that anywhere from 40 to 70 cents a gallon for taxes depending on where you live, and the rest goes to distributors and station owners. Up to 60 cents a gallon goes to the station owners, which is at least 10 times as much as the refining companies are getting per gallon, prolly more.

One thing to keep in mind, the station owners are making a slightly higher percentage of profit that in recent past but the price of a gallon has basically doubled so they are making more than twice as much as they were 5 years ago. Most of them are literally making a killing right now.

Kind of like the real estate vultures during the housing bubble. They were still getting 6% commission but the price of houses basically tripled, and so did their commission. All the way to the bank ...

And around here, mid-grade is often LESS EXPENSIVE than 87...

If the mid grade is cheaper than regular, why would anyone buy regular?

Because there is absolutely no advantage to running a higher octane gasoline than your engine requires.
If it runs well and efficiently on regular, changing to mid grade would do nothing for you, and may even decrease efficiency.
If your engine is designed to run better on mid grade then it would help.

why is diesel, the least refined fuel, priced higher than premium? here in the bay area, its about .10/gal more than premium.

Shhhhh in St Louis they raised Premium to + 30 cents and mid to +15.

Like everybody all at once. No there is no price fixing there.

That's what I asked a couple months ago...and got no answer.

They know what people are willing to pay for a perceived better product.

Any more than 20 cents, and I do not think people would buy the better product...
I am sure marketing studies have proven this example... ;-(

Funny thing is that premium doesn't seem like such an extra expense when it's 20 cents more than regular now. It's such a smaller percentage of the total cost @ ~$4/gal. Same with price shopping, what's 10 cents @ gallon when it's $80.00 to fill the tank?

The answer is easy. TAXES!

Diesel (and its distant cousin Jet fuel) is very easy to refine and much easier and lower on the cracking tree than gasoline. It costs less to refine and cities, states and so on make it up with TAXES!

I'd like to know the location of the gas stations with 60 cent/gallon margins. I have been actively looking to buy commercial property and the margin on gasoline sales averages around 10-15 cents/gallon. Sellers of commercial property have every incentive to juice their profit numbers, so why would they claim 15 cents/gallon instead of 60 cents/gallon?

The real money at gas stations is in items inside the store. The margin on junk food is incredible.

Supply and demand. It's the capitalist way.

http://seattlepi.nwsource.com/lifestyle/354435_consumer11.html


2008 Taxes on Diesel:
http://www.factsonfuel.org/images/tax_chart.gif

I find it extremely irritating when the garages advertize the price for regular on the board but don't post their prices for Super and Premium until you get to the pump. Around here different garages just seem to add on any amount they like between +10c and +15c for each grade increase.

Heard on the radio you Americans are all upset over the recent prices on gas. Well, we pay more than double your prices so quit whining please. :D

Edit: Or me and Stijn will come over and woop your asses!

Stijn, you with me..?

Stijn!......

The cost to refine diesel is miniscule compared to the raw materials cost. Same with gasoline. The difference between the cost to refine gas and the cost to refine diesel is only a penny or two per gallon after you factor out the cost of crude oil and factor in the volumetric expansion of gasoline during the refining process (the density decreases but the mass stays the same, so the volume increases. we sell it by the gallon so there is a net gain).

Crude oil costs around $2.70 a gallon.
The raw materials for diesel costs the same as for gas as they are made out of the same stuff (crude oil).
The cost to refine either is somewhere around 15 cents a cents per gallon depending on the size and efficiency of the refinery. It varies from place to place but not as much as some people think.

So why is the diesel price so much higher than gasoline?
Gasoline is a loser right now. Refineries struggling to break even with gas right now due to the incredibly high cost of crude and also because there is an abundance in supply due to over-production during the winter and reduced demand at the pumps. Little to no profit in gasoline at the wholesale level.
That same scenario doesn't apply to diesel.
There is enough to go around but not a whole bunch extra. The demand hasn't fallen off like with gasoline, if anythnig the demand for diesel is still increasing.
So the price of diesel is still realistic and cosistant when compared to the cost of crude. The net profit margin on diesel hasn't fallen off as much as it has with gas.
Here in So Cal in february, diesel was selling at a 40 cent per gallon premium over gasoline (wholesale). that has fallen but diesel is still more profitable. Obviouasly we tweaked the refining process as much as possible to maximize diesel production to keep from losing money.
Now, that all has to do with wholesale production. retail is a whole nuther story. The retailers are jacking the price of diesel as high as they can get away with due to a captive market, and they can get away with it because Joe Blow down the street is doing the same thing. Being a gas station owner right now is a very profitable thing to be.

That is normally the case but right now, this month, it isn't true.

Lets look at some real data, shall we?
http://tonto.eia.doe.gov/dnav/pet/pet_pri_allmg_d_SCA_PTA_cpgal_m.htm

in California for example, the average cost for conventional regular gasoline in the month of February was $2.57.
There's about 36 cents on top of that for federal and state excise taxes, and an additional 8% sales tax on the price of the gas and also on the excise taxes, for a sub-total of $3.16 a gallon. There's a little bit of cost for transporting the gas to the station but it's not that much, lets say 3 cents a gallon just for fun. Now we're up to $3.19. We were paying around $3.70 a gallon retail on average at that time. That's a mark-up of around 51 cents a gallon.
Using today's spot prices and retail prices will yield the same results within a few cents.
I didn't pick the highest region , I didn't pick the lowest region, I just grabbed an example where I live. In this place, So Cal, there are lots of stations that charge much higher than average. A shell or mobil station might sell gas for 20 cents more than an ARCO.
So you go to the mobil station and pay and additional 15 or 20 cents more than at the arco, and you are well over 60 cents per gallon mark-up.

Even when the markup on gas drops back down to a more typical 12%, they'll still be making 45 cents per gallon profit at $3.75 per gallon.