By Gabriel Levin and Will Kubzansky | Bloomberg
Drivers across the US, including some behind the wheel of performance vehicles, are switching from premium gasoline to regular in a search for savings as fuel prices remain elevated.
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Between June 22nd and June 25th, daily sales of premium gasoline were down nearly 5% by volume compared to the average from February, just before the Iran war led to a rapid spike in prices, according to data from fuel cash-back app Upside. Mid-grade sales were down around 2%, while sales of regular were up by around 10%, the data show.
The data matches a broader trend in which consumers have traded down from higher grade gasoline since prices surged at the start of the war.
When fuel prices rise “we almost always see premium cannibalized to regular,” said Patrick De Haan, head of petroleum analysis at GasBuddy. Drivers who prefer premium fuel but whose vehicles don’t need it generally make the switch, he said.
But it’s also drivers of expensive, luxury or high-horsepower vehicles that run better or require premium fuel who are opting to fill up with lower-grade gas in order to save money. The energy price spike ushered in by the Iran war left many Americans off guard as inflation remains persistent and higher costs ding consumer sentiment.
Carlo Santos, who works in the film and TV industry in Los Angeles, traded in his Tesla Model 3 for a 2024 Ford Mustang in February. The iconic American muscle car, known for its V8 engines and aggressive acceleration, recommends but does not require premium gas. A week after the 38-year-old switched cars, the US and Israel attacked Iran, sending fuel costs surging, including in California, the US’s most expensive fuel market.
Santos soon saw the cost of his daily 40-mile commute through L.A.’s stop-and-go traffic surge. His monthly fuel bill rose to about $900, up from $150 in energy costs for his Tesla. As a last resort, Santos began to mix regular and premium gasoline in his Mustang for about two weeks in May, still costing him a little more money. Then, begrudgingly, he traded the sports car back in for a Tesla.
“At almost $1000 a month, I couldn’t reasonably afford to keep that Mustang as a daily commuter,” Santos said. There’s “something about driving electric that just has no soul.”
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Luxury auto dealers like Porsche and BMW advise against trading down to a fuel grade lower than the minimum level a vehicle requires. The savings may not pay out in the longer run, either, with lower octane fuel leading to an immediate drop in horsepower and fuel efficiency, automakers say. It can also cause engine knocking that risks irreversible damage.
And even with prices for all grades of gas easing some in recent weeks, consumers are still wary of buying higher-end fuel, according to Thomas Weinandy, principal research economist at Upside.
President Donald Trump had said gas prices would fall quickly after the US and Iran signed an interim peace deal and the vital energy transit route, the Strait of Hormuz, was reopened. But while oil prices have plummeted, the decline in gas has been gradual, which economists say is typical when a price shock begins to ease.
Regular gasoline averaged $3.81 a gallon as of Friday, while premium gas averaged $4.70 a gallon, according to the American Automobile Association. That’s good for a roughly 90-cent difference between the grades, an all-time high. And premium prices typically stay higher for longer, Weinandy said.
The growing gap between premium and regular gas prices also reflects a broader mismatch in the fuel market. Automakers have sold more and more vehicles that require or recommend premium gasoline, while refiners have been slower to expand production of higher-octane fuel, according to De Haan.
The chasm between the two grades could widen even further to around a dollar a gallon by the end of the year, De Haan said, even as crude costs ease overall.
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