Last week you mentioned that premium fuel costs 10 to 14 cents a litre more than regular here. Why? In the U.S., the difference is about 20 cents per gallon between regular and premium. Is this just another rip-off? – Michael
Premium fuel, by any other name, should cost a lot less in Canada, gas experts say.
“The difference between regular unleaded and premium is, generally speaking, octane. That's pretty much it,” says fuel analyst Roger McKnight. “Some cars are designed to use it, but it's not better quality per se. They charge more because people pay it.”
The wholesale price difference between regular (87 octane) and premium (91) is about 5.5 cents, but the price difference at the pumps is typically about 15 cents, says McKnight, a senior petroleum adviser with En-Pro International.
“Something magically happens between when they take it out of the holding tank and when it arrives at the service station,” McKnight says.
In the U.S., premium gasoline typically costs between 10 and 12 cents a gallon more than regular, says Jason Toews, a petroleum expert with GasBuddy.com. That's roughly 2 to 3 cents a litre.
So does premium cost so much more here because we're a captive market?
“I wouldn't call it a captive market; that implies that there's not much competition. We have competition,” says Jason Parent, analyst with The Kent Group. “They realize they can sell it for more. They can do it because it's considered a status thing, a vanity thing.”
Experts say the grades don't correspond to quality – regular, mid grade and premium don't mean good, better and best. If your car is designed to use regular, using higher grade gas is just a waste of money.
Both Parent and McKnight say the price hike has little, if anything, to do with the cost of producing premium gasoline.
“A barrel of crude is a barrel of crude,” McKnight says. “Even that 5 cent [wholesale difference]seems high.”
Parent says the price isn't tied to what it costs to manufacture. He compares it to the water industry, where consumers will pay for a bottle of fancy water when really, it's just water.
“They couldn't do this with regular gas, because consumers react to a 0.1 cent difference, and they'll go to another station,” Parent says.
There are some differences between the grades – most retailers say their higher grades have extra additives that will lower emissions and clean your engine, Toews says.
But regular gasoline also has added detergents. So are the detergents in premium gasoline better?
It's tough to say, since each major retailer has its own formula.
“I have read that the additive packages are better at keeping the fuel system clean in some premium fuels,” says George Iny, president of the Automobile Protection Association, an industry watchdog. “I'm not aware if there is a real value to this in a modern vehicle.”
“I'm of the opinion that it's just marketing. You can't buy dirty polluting gasoline in Canada,” Toews says. “And I've never known anyone who had a problem with a dirty engine.”
Another difference between the grades is the fact that regular gasoline in Canada can include up to 10% ethanol – biofuel from grains – while the higher grades have none, Parent says.
“Ethanol can be corrosive in large quantities, but 10% is generally considered safe,” he said. “In the States, they're really pushing bio fuels, so it can be as much as 15%. That's borderline.”
The price difference between regular gasoline and premium does vary between gas stations, Toews says – it's usually more expensive in more affluent neighbourhoods.
“It depends on the gas station, For example, right now I see a Shell station in Toronto where there's a 19 cents difference between regular and premium, a Petro-Canada where it's 14 cents and a Costco where it's 8 cents.”
If your car is designed to run on higher octane gasoline, your owner's manual will say so. Usually it’s recommended – which generally means you can use regular unleaded (and all regular gasoline at Canadian gas stations is unleaded), with the warning that performance and fuel economy could suffer if you use regular. A few high-end cars require premium and manufacturers says they can't take regular without damage. Just be sure to check your manual.
Using regular may mean that your car's horsepower and fuel economy won't match the best numbers from the manufacturer, but will the difference be noticeable?
So far, I haven’t been able to find any real numbers on this. The Automobile Protection Association says it probably won’t be noticeable during normal driving. So if you’re trying to see how fast you can make it from 0-100 km/h on a race track, stick with the fuel grade that your owner’s manual recommends.
If it recommends premium, that extra 15 cents a litre will really start to add up.
“It sure does. I have to pay $1.52 a litre. When it calls for premium, you put in premium. I don't want to screw up my warranty,” McKnight says. “And I drive a Maxima.”
If you have any driving queries for Jason, send him a message at email@example.com or contact him through Twitter: @JasonTchir