I don’t put gas in my car much any more. In fact, I average 41 days between refuels, which suits me and my wallet just fine. However, I drive past my local gas station on the way to the train station each morning, and I take mental note of the price of gas. I believe I have noted a strange phenomenon–one that presents a chink in the armor of gas pricing.
Ordinarily, the price of the three types of gasoline sold at the station near my house differ by about 10 cents each. Thus, if 87 octane is $2.50, 89 octane is $2.60 and 92 octane is $2.70. Now let’s set aside for the moment why anyone who doesn’t drive a Ferrari would buy anything other than 87 octane gasoline and instead focus on price differentials. These differences are for the most part, consistent from station-to-station across the board. The differences would imply higher manufacturing costs and/or lower demands for the higher octane gasoline, which is priced higher because of its better “anti-knock” quality.
This morning, however, when I passed my local station, I noted the prices were as follows:
87 octane: $3.11
89 octane: $3.25
92 octane: $3.29
This is suspicious to me. Why, I asked myself, has 89 octane suddenly become “cheaper” relative to 92 octane? Where before, there was always a consistent 10 cents difference, this morning there was only a 4 cents difference between the two flavors. One might argue that it is because the price of gas is high to begin with and this is a way of making the higher octane gasoline more palatable to the ignorant consumer who would buy it in the first place.
But I ask, if one octane level can be priced only 4 cents cheaper than another, doesn’t that imply that there really isn’t much of a difference in the manufacturing and production costs in the first place? Does that seem to indicate that the pricing of gasoline is much more arbitrary than what the oil companies would have us believe?
I don’t know. Maybe I am missing something. Afterall, economics was never a strong suit of mine. But it sure seems suspicious and I wonder why more people don’t pick this up. (Of course, you have to be able to subtract two numbers in your head in order to recognize this, so that might explain why.)