Monday, May 01, 2006

The dirty little secret about mid-grade gasoline

After I started working at my current company I soon learned a dirty little secret of the petroleum industry: don't buy mid-grade gasoline; it's a rip-off.

Mid-grade gasoline (plus gasoline, or whatever it's called in any given location) is usually priced right between regular gasoline and premium (super) gasoline. If regular is $2.99 per gallon, mid-grade is usually $3.09 and premium is $3.19. (I can't remember the split for regular, mid-grade and premium gas in Canadian cents per litre in Canada.)

Mid-grade prices are usually exactly half way between regular and premium, meaning you would get the same price if you filled half your tank with regular gasoline and half your tank with premium gasoline.

Many gas stations create mid-grade gasoline by pumping out of the regular tank and the premium tank, simultaneously. A lot of American stations got rid of their mid-grade tanks in favour of regular tanks back in the 90s when the EPA was cleaning up gas stations.

There are stations that still have a mid-grade tank. Fuel terminals still sell mid-grade gasoline. Not all oil jobbers buy mid-grade gasoline. Some simply buy regular gasoline and premium gasoline and pump it into the same tanker trailer compartment. This is called "splash blending".

As you can see, there's nothing magic about mid-grade gasoline. It's just a mix of regular and premium. That's not the dirty little secret. The secret has to do with the ratio between regular and premium and how it affects the price.

As I mentioned above, the price of mid-grade is usually right in the middle of the price of regular and premium. 100 gallons of mid-grade is the same price as 50 gallons of regular and 50 gallons of premium. That's not the ratio used by most stations. Most stations use 60 gallons of regular to 40 gallons of premium, or even 65 gallons of regular to 35 gallons of premium, depending on the ratio allowed by the state (or, I'm guessing, province). Michigan, for instance, allows 65:35.

In order to keep prices below some artificial — but psychologically significant — price point, stations have sometimes kept to the 10 cent per gallon difference between regular and mid-grade but lowered the difference between mid-grade and premium, meaning that mid-grade is an even worse buy. I have seen gas regular sell for $2.85, mid-grade at $2.95 and premium at $2.99 per gallon in an effort to stop premium slip over the $3 per gallon mark.

If you buy mid-grade you can save yourself some money by purchasing regular and premium gasoline separately and mixing it yourself. You wouldn't be doing anything that the gas stations weren't doing themselves, except at a better price.

[Edit: I was rushed when I made this post. I changed it a little to make it more international (i.e. I made a reference to Canada) and I changed the wording of some of the sentences. Oh, and I changed "by" to "buy". Stupid reliance on spell checkers...]

9 comments:

BeingHuman said...

Wow, that is some fascinating information, particularly to one of those fools who uses the mid grade (I've slowl been priced out of premium).

Good thing our gov't is doing something about this . . . oh wait.

Allan Goodall said...

It shocked me when I learned about it. The government mandates how little premium gas can be used in the splash blending of mid-grade. Not all companies stick to that limit. I know of one company in Louisiana that does a 65:35 regular:premium split, and others that do 60:40.

The gas stations don't want you to know this, of course, because they have seen a number of people do what you did and switch from premium to mid-grade.

Winter said...

Allan you better not get a check from the government for $100 dollars to use for gas. You should only get like $2.50 ... Here are my reasons why:

1. You were not born here. (Sure this is not your fault, but still.)
2. You are Canadian. (Why would you ever leave such a great country!?)
3. I'm just kidding.. Seriously can I borrow a $100 dollars?

Allan Goodall said...

You may need to borrow that $100 if you were expecting the senate to give it to you. Senator Bill Frist was championing the idea of giving people $100 because of the cost of gas. This was roundly criticized by just about everyone, and the Republicans have apparently dropped it.

As for why I left Canada... *points at Alana*. It's her fault! She couldn't move to Canada because of the kids. We're still keeping our options open, though, so we can possibly retire there. At least our meds would be covered.

Winter said...

So is that a no on the $100 bucks?

Allan Goodall said...

I was going to offer you $100 Canadian just to see you cringe and laugh, but ever since I got down here the U.S. dollar has tanked and the Canadian dollar is worth almost 90 cents. So now it's worth real money.

This is my roundabout way of saying, "No on the $100 bucks."

Michael Skeet said...

Great job on this, guy. I only use premium myself... and because I bike to work most of the time (I make the occasional concession to the Canadian winter) I can even afford to gas up the car every other month.

Just be grateful you lot aren't paying Canadian gas prices. Yet.

Allan Goodall said...

Thanks, Michael!

I don't think we've tried running premium in the Corolla. I don't know if we'd see a difference in fuel efficiency if we did. Some vehicles run better on premium, and thus make up the price difference. Others don't see enough difference to make it worthwhile.

I'm not sure what the higher running temperatures do to a modern engine.

Michael Skeet said...

Further to Canadian gas prices: the CBC mentioned yesterday that gas prices in the U.S. have gone up by 70% this year (100% over the last two years) while Canadian prices have only gone up 20%. Our neighbours to the south will be caught up to us in no time.

Nissan recommends that the six-cylinder engine be run on premium gas, and I'm not inclined to argue.