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?

I would think that with octane, filling a tank 2/3 with 87 octane and 1/3 with 93 octane is equivalent to using 89 octane. If I'm incorrect, please explain why.

To taffscott1, I haven't had any caffeine, but I do need to go to sleep.

None of the answers are satisfactory so far.

It costs 20-30 cents more to increase the octane by 2, from 87 to 89. But it only costs about 10 cents more to increase the octane by another 4, from 89 to 93.

For those who say "refining costs": Is it very expensive for the refiners to boost the octane from 87 to 89, but much easier to boost it higher once you get to 89? Otherwise, that answer makes no sense.

Market conditions explain the overall price increases, but not necessarily the price differences between octane levels. Maybe 89 octane is in very high demand and they can get a bigger profit on it compared to 93 octane. Maybe the price of regular is artificially lower so the stations can advertise it in giant numbers for all to see (like a loss leader in supermarkets). If you say "market conditions", please explain further.

Also, one person can make a difference. If there is a conspiracy or price fixing, this is illegal and something can be done about it.

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

"Is it the oil companies?" No, since oil companies don't have much control over the price of gas. Gas and oil prices are usually controlled by countries or a coalition of countries. "Is it the turmoil in the middle east?" No, since most of the oil produced don't come from the Middle East. The entire Middle East can be destroyed and most of the oil production would still be unaffected. "Is it the fact that there isn't much oil left on the planet?" No, since if it did, then everybody's cars would have runned out of gas by now. On the other hand, the argument 'there isn't much oil left on the planet' can be use as an excuse to raise gas prices and fund alternative energy research. A researcher can be easily bought to prove that there's not much oil (like in the planet) or there's plenty of oil (like in the Middle East). "Is it a global conspiracy?" If one said yes even if it was true, will you believe it? Nevertheless, it's a reality that there are a lot parties involved on controlling gas price, whether to raise it or to lower it. Market makers, researchers, distributors, and so on. All of them, might have a common boss/manager. Anyway. With all the expense needed to research, extract, refine, distribute, and so on to oil, one should ask, why is the price of gas is so low?

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

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.

Answer 5

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

Answer 6

Holy crap!!! You're so smart!

Evil big oil needs to be scared of you.