Blame the war in Ukraine and more environmental regulations in the US.
US and European oil refiners are having difficulties obtaining sufficient amounts of octane to produce premium fuel, resulting in higher prices at the pumps, according to a Bloomberg report.
The reasons for this should not come as a surprise. First off, there's the ongoing war in Ukraine following Russia's invasion that began just over a year ago. There's also been an increase in US environmental regulations and a lack of refining capacity. The result?
About a 15% increase in the price per gallon compared to the same time last year. It's even worse in the UK, where the price gap between regular and premium fuel has increased to 25%. The good news is that regular fuel with a lower octane level is not expected to face these problems because there are enough low-octane components compared to the amount necessary for high-octane fuel.
The average car owner won't be affected, unlike those with high-performance and luxury vehicles, like a Ferrari F8 Tributo.
The UK and the European Union banned most seaborne imports of Russian petroleum, reducing the supply of naphtha, a critical component needed to make gasoline. Europe has also reduced the supply of octane-boosting additives due to the higher energy costs and lower demand. But the loss of Russian feedstocks, critical for gasoline markets, is taking its toll. At the same time, Tier 3 regulations in the US have kicked in, which require a lowered sulfur content in gasoline.
The process requires additional hydrotreating – the reaction of organic compounds in the presence of high-pressure hydrogen to remove oxygen – of naphtha and gasoline during refining.
Translation: This process destroys octane, therefore adding to the supply shortage and increasing value between regular and premium grades. Analysts at Bank of America Corp. stated that “Meeting lower sulfur requirements comes at the expense of octane levels, which likely contributed to soaring prices for high octane blending components.”
It's expected this trend will continue well into 2023. A shortage of refining capacity has also contributed to the price differences between the two fuel types.
Fortunately, additional capacity is expected later this year, but it's unlikely to be in time for the summer when performance car owners love to drive the most.
Keyword: Premium Fuel Is Getting Pricier Because Refiners Can't Get Enough Octane