The Price of Premium Gas
According to U.S.A. Today‘s “Weekend Gas Gauge,” the current average price of regular gasoline is $4.026 per gallon. A year ago the price was $2.945.
What I hadn’t realized was that the gap between regular gas and premium gas has also increased. Right now, premium gas is 38.5 cents per gallon more expensive than regular gas. A year ago, that gap was 29.5 cents. (In percentage terms the gap hasn’t grown, but it seems to me absolute differences — rather than percentage terms — are the right way to think about this problem.)
Why should premium gas be relatively more expensive today?
One simple explanation is that the additives that are put into premium gas have gotten more expensive.
A more interesting economic story is the following:
As gas prices have gone up generally, I suspect that many of the people who used to buy premium gas have shifted back to regular gas. The only people who still buy premium gas (Is there actually a good reason to buy premium gas?) are those who are wholly committed to premium gas. These folks are less price sensitive than the ones who used to buy premium gas. Consequently, the profit maximizing reaction of gas stations is to increase the gap in price between regular and premium gas.
Perhaps there are other explanations as well.
Does anybody out there know what the actual explanation is?