Why Premium Gasoline Costs So Much More Than Regular — And Why Drivers Keep Buying It

For a few days this spring, the number posted above the premium button at US gas pumps averaged north of $5.40 a gallon. Even at that price, American drivers kept choosing it. Premium fuel now typically runs about a dollar more per gallon than regular — a far larger gap than the modest premium buyers paid for high-octane gas a decade ago — and demand for it keeps climbing anyway.

Part of that rising demand has a straightforward explanation: automakers are building more vehicles that call for higher-octane fuel, generally at least 91 octane, to run properly. But industry analysts say a lot of the demand isn't coming from mechanical necessity — it's coming from drivers who simply believe premium fuel is better for their engines, whether or not their car actually needs it. Notably, even when oil-price shocks tied to the war involving Iran pushed pump prices sharply higher, it did little to change American driving or buying habits, especially among owners of high-end SUVs, trucks and luxury vehicles that do genuinely require the higher grade.

Whatever is driving the extra demand, gas station operators have used it to their advantage, steadily widening the price gap between premium and regular fuel over the past two decades in a way that has turned premium into one of the more profitable products at the pump.

Historically, premium cost only about 20 cents more per gallon than regular, a gap that held fairly steady for years. That began changing around 2005, then accelerated sharply about a decade later. Data from the US Energy Information Administration shows the premium-to-regular price gap widened to 40 cents by 2015, 60 cents by 2018, and past 80 cents by 2022; today it sits just under a full dollar.

Some of that increase is tied to real refining costs. Federal regulations enacted in the mid-2000s required automakers to cut sulfur emissions from vehicles, which also has the side effect of lowering octane levels. To compensate and keep premium fuel at its higher octane rating, refiners began blending in more ethanol, a cleaner-burning but pricier additive. Even so, the EIA's wholesale price data tells a different story than what drivers see at the pump: while the retail price gap between premium and regular widened by roughly 70 cents a gallon over 20 years, the wholesale cost gap grew by only about 20 cents in that same span. Andy Lipow, president of Lipow Oil Associates, put it bluntly: the extra money isn't going toward higher refining costs, it's going straight into the pockets of the service stations themselves.

Consumer habits back up that reading. Premium accounted for roughly 13% of all gasoline sold last year, up from about 9% in 2013, according to Lipow's figures. A meaningful share of that growth traces back to the auto industry: by 2018, more new vehicle models on the market recommended or required premium fuel than recommended regular, per Department of Energy figures. Because those vehicles tend to be pricier models — luxury cars, large SUVs and trucks — station owners have found buyers largely willing to absorb higher premium prices without complaint. As oil analyst Tom Kloza noted, people who own cars that actually need premium usually aren't the ones sweating the extra cost.

But mechanical necessity doesn't explain the whole picture. Plenty of drivers buy premium purely because they believe it will make their car run better or last longer, even when their owner's manual calls only for regular fuel. Lipow says that belief is largely a product of decades of branding rather than chemistry.

The premium mystique dates back to 1923, when General Motors and Esso launched Ethyl Corp to sell a fuel additive called tetraethyllead, which reduced "knocking" — the phenomenon where fuel ignites prematurely inside an engine. As "Ethyl" became shorthand for a superior fuel, competing gas stations that couldn't use the trademarked additive started branding their high-performance blends as "premium" instead, a term that eventually became standard across the industry.

The premium label picked up new meaning again in the 1950s, as automakers introduced high-compression turbocharged engines that improved fuel economy but were more prone to knocking, pushing stations to market dedicated high-octane blends for them. Decades later, in the 1980s and '90s, refiners began adding detergents to premium gas to clear carbon buildup from fuel-injected engines, a practice the EPA eventually mandated industry-wide in 1996 — after which stations began advertising "Top Tier" fuel as a further step up. More recently, some chains have pushed octane levels even higher: 93 octane is now standard on the East Coast, and Sunoco has introduced a 94-octane "Ultra" blend.

The science, however, doesn't support most of the marketing. Octane measures a fuel's resistance to knocking, not how much power or speed it delivers — that comes from the engine itself. For turbocharged engines actually designed to exploit it, higher octane can translate into more efficient combustion, better torque and more horsepower. But for cars engineered to run on standard 87-octane fuel, a 2016 AAA study found premium delivered no measurable benefit whatsoever. And even vehicles that do benefit from a higher grade rarely need anything above 91 octane, meaning the 93- or 94-octane options many stations now push offer no real-world advantage. As Lipow summed it up, it's mostly a marketing play — drivers pay more for a boost they'll likely never actually notice.

Some information for this report was gathered via edition.cnn.com.