Gas price conspiracy?

Question

I use regular (87 octane) gas, but noticed that mid-grade (89 octane) is at least $0.20 more, and premium (93 octane) is usually only another $0.10 more. For example, regular $3.299, mid-grade $3.499, premium $3.599. If someone wanted 89 octane gas they would save about $0.10/gallon by mixing 2/3 regular and 1/3 premium.

(1) Is this some kind of legitimate supply and demand issue, or is there a conspiracy by the oil companies to jack up the prices unnecessarily on higher grades, especially mid-grade?

(2) Should higher oil prices cause the price differences between the various grades to increase as well? For example, if regular was $1.10 and premium was $1.20, if regular triples to $3.30, shouldn't premium still be $0.10 more at $3.40, not triple to $3.60? Legitimate or a conspiracy?

(3) I live in NY and in NJ gas prices are a lot lower, but the price differences fluctuate. Why would NJ gas cost $0.25 less some times, $0.40 less at other times? Conspiracy or price fixing?

Answer 1

All of it has to do with what the market can handle.

If people suddenly stopped driving, the price would go down. Of course that won't happen since so many people now live so far from work, so people will start to cut back on other goods as income becomes less and less disposable income.

Edit:

The market DOES explain price differences between octane levels. People are willing to pay it, so gas stations are willing to charge it. The average person will not go to the trouble of filling 1/3:2/3 to get the savings you suggest.

Walk through the grocery store sometime and look at unit cost on items that are sold in bulk vs the smaller packages. You find the same thing as gas. People often pay more when intuition tells them they should be getting a break. Again, if people suddenly stopped buying the more expensive bulk items the price would come down.

It is all market forces.

Answer 2

There is no conspiracy. I think you need to cut down on your caffeine intake and get some sleep.

Answer 3

I understand what you're saying, though no one would really want to pump 2/3 "regular", then stop, hang the pump up, and finish it off with "premium". Especially if you're paying outside with a credit card, it is too time consuming. Even paying cash, the cashier would have to wait until you hang up the pump so she could reset it for the next grade. HASSLE.

The answer you'll get from the oil companies is that it takes more to refine "plus" and "premium", thats' why they cost more.

Answer 4

Holy c**p!!! You're so smart!

Evil big oil needs to be scared of you.

Answer 5

The octane numbers are not calculated like that.  There is a rather complex formula to determine octane numbers.  They are not necessarily proportional to the content of any particular ingredient.