Here’s some bad news for drivers of luxury and performance cars who are pumping the top grade of gasoline: the premium they pay over regular fuel is getting pricier.
U.S. and European refiners are scrambling to get enough octane to make high-quality gasoline. There are several potential reasons for the shortfall, including the fallout of Russia’s war in Ukraine, the impact of US environmental regulations and a lack of refining capacity.
The net effect is that it’s making the fuel even more expensive than usual, when compared to regular unleaded. In the U.S., the price gap is around 75 cents a gallon — about 15% more than during the same period last year — data from automotive group AAA show. In the U.K., the premium has widened by 25% on an annual basis, the most recent monthly data show.
“The current record seasonal strength in octane pricing doesn’t portend well to a smooth transition to summer-specification gasoline,” said Callum Bruce, an analyst at Goldman Sachs Group Inc.
Refiners are in the process of making the switch to summer-grade gasoline. Winter fuel contains more butane from natural gas processing to increase octane.
Octane itself is a hydrocarbon, produced in the refining of crude oil, though consumers generally know about it through the so-called octane rating for gasoline. A higher value means the fuel is more stable and less likely to cause engine knock. Vehicle manufacturers often recommend high-octane gasoline — the premium grades at the pump — to get peak performance from turbocharged or high-compression engines.
Even regular gasoline contains octane. However, the shortfall shouldn’t be problematic because there are more low-octane components available for making regular gasoline than high-octane fuel.
The European Union and the U.K. last month banned most seaborne imports of Russian petroleum products, reducing the region’s supply of naphtha, a key component in making gasoline. Meanwhile, the European petrochemical industry has cut supply of octane-boosting additives as high energy costs and weak demand curbed operations.
The loss of these Russian feedstocks is critical for gasoline markets this year, according to consultant Energy Aspects Ltd.
‘Explosive’ Price Gains
Separately, U.S. “Tier 3” environmental regulations, which require lower sulfur content in gasoline, have created complications.
Compliance with the rules requires more severe…
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