LONDON -- Sales of premium-grade gasoline continue to rise, and more efficient vehicle engines are to thank for it.
According to data from the Energy Information Administration (EIA), premium rose to about 11.7% of gasoline sold in June, or more than 1 million barrels per day (bpd). This compares to 7.6% share, or 680,000 bpd, back in June 2008 when gasoline prices were high.
In a commentary, Reuters analyst John Kemp cited a couple of factors for premium’s rise. In the shorter term, low gasoline prices have encouraged drivers who typically fill up with regular to upgrade their fuel choice. This phenomenon played out in the 1980s and 1990s, during a time of falling oil and gasoline prices.
“Consumers tended to fill their tanks with premium gasoline when oil prices were low in the hope of achieving an improvement in engine performance, but switch to cheaper regular grade when oil prices rose,” said Kemp, who is based in London. This is despite the fact that premium-grade gasoline does not improve the performance of engines that are engineered to run on regular.
After gasoline prices quadrupled from 1999 to 2008, premium’s share of sales plummeted from 20% to below 8%. Since then, it has slowly inched back up. This time, a longer-term trend is also at play: the drive by auto manufacturers toward more efficient, turbocharged engines.
These engines are able to use less fuel because they run at higher cylinder pressures. To run smoothly and without setting off engine knock, however, they require higher-octane fuel. Premium’s octane is typically around 91, compared to 87 for regular grade.
The share of new light-duty vehicles with turbocharged engines has more than quintupled from the 2009 to the 2014 model years, now making up 17.6% of new vehicles sold.
This includes almost half of Ford’s F-150 light-duty trucks, according to the National Research Council. Ford has been switching out the series’ V8 engines with smaller, more fuel-efficient but just as powerful 3.5-liter V6 engines.
The EIA projects that more than 80% of new gasoline-powered vehicles sold in the United States by 2025 will have turbocharged engines.
This increased demand for premium gasoline has boosted demand for blending components that have higher octane ratings, according to the EIA.
Refiners must meet certain standards for octane, volatility, aromatics, sulphur and viscosity, and aim to do so in the least expensive way possible. Butane is a cheap and easy way to boost the octane in gasoline, so it is a popular choice in the winter. But in the summer, butane vaporizes easily in the heat, which can cause engine vapor lock and produce smog.
So during the summer, refiners will use the more expensive alkylate, which does not vaporize easily, to increase octane ratings. They also spend the summer months producing extra butane to blend in during the fall and winter, beginning in September and October.
Other options for increasing octane include swapping components with very low octane ratings, such as straight-run naphtha, with ones that have a bit higher octane, such as reformate and catalytic gasoline. Refiners can also blend in more ethanol, which is high-octane but has less energy than other components, so it provides fewer miles per gallon.
But with premium sales growing, the average octane required for the entire blending pool continues to rise, heating up demand for high-octane components.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.