Photograph by Ty Wright, Bloomberg/Getty Images
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A customer prepares to pump fuel at a Go Mart Inc. gas station in Rockbridge, Ohio, this past February. Thanks to a glut of oil that has spurred refiners to make as much fuel as they can, pump prices nationwide are down about 26 cents a gallon from a year ago.

Photograph by Ty Wright, Bloomberg/Getty Images

U.S. Demand for Premium Gas Is Going Up. Why?

Gas prices are low, but that doesn’t tell the whole story of why drivers are upgrading at the pump.

More U.S. drivers are springing for premium gasoline, and part of the trend has nothing to do with oil’s slump. Though gas prices have dipped to the lowest levels since 2009, automakers are also making fundamental changes to how cars run. Those changes, according to a recent government analysis, will have “widespread implications” for future fuel markets.

Pushing the higher octane button at the pump no longer necessarily means you’re driving a luxury car. New versions of the Honda Civic, smart fortwo, MINI Cooper, and other affordable models either require or recommend premium. Stricter fuel economy standards meant to reduce greenhouse gas emissions are driving big shifts toward auto designs that favor the more expensive fuel—at the same time, some drivers are upgrading when they don’t really need to.

Paying More of a Premium for Premium

Premium’s current share of overall gasoline sales is relatively small—about 11 percent—but that’s the highest in a decade. The number is rising in part because gas prices have dropped, making it easier to splurge on premium gas.

“Some people mistakenly believe they're ‘treating’ their car by buying premium gasoline,” says Michael Green, spokesperson for the motorist group AAA. Premium gas only makes sense for engines designed to use it, but for drivers who don’t realize this, he says, “It's like taking their car to the day spa.”

The luxe association makes sense. Premium gas is pricey, and getting pricier: The U.S. national average per gallon is currently $2.69, a full 47 cents above regular. That’s a shift from previous years, when the gap between fuels was lower.

“There was a time when premium was only 15 to 20 cents per gallon more than regular,” says Green, “but those days have long passed us by." The gap persists because premium gas buyers aren’t as price-sensitive as those for regular, Green says, adding that domestic oil supplies are better suited to refining into regular fuel.

Designing for the New Fuel Economy Rules

Charged with achieving an average of 50 miles per gallon by 2025, U.S. automakers are making a variety of changes to car designs. One of those is to use smaller engines, adding a turbocharger to boost power. Turbochargers force compressed air into an engine’s cylinders, allowing for a bigger burst of power when the fuel ignites.  

The higher octane rating of premium fuel, which allows it to withstand more compression before it will ignite, makes it well suited to turbocharged engines. If fuel detonates prematurely, it creates “knock,” which can damage the engine.

And automakers argue that the U.S. needs to raise the octane in its gasoline supply. “Higher octane is necessary for better engine efficiency,” said one GM executive at a recent SAE conference.

Currently, regular U.S. gas gets an 87 octane rating, while premium gets 93. An MIT study in 2014 argued that raising octane levels to 93 and 98, respectively, would result in cars burning up to 4.5 percent less gasoline, in turn more than 35 million tons of carbon dioxide emissions a year—an amount equivalent to what the state of Montana contributes.

Even at current octane ratings, premium is proving more appealing to manufacturers. “As automakers produce more vehicles with turbocharged engines, it is likely they will recommend or require more light-duty vehicles to use higher-octane gasoline,” the Energy Information Administration said in its recent analysis.

Turbochargers can boost efficiency up to 6 percent, according to the U.S. Department of Energy. That will seem like small potatoes to someone paying some 45 percent more for premium fuel. Are drivers really going to be stuck paying more to fill up their cars in the name of fuel economy?

It isn’t quite that simple. “A lot of the turbocharged engines being released now are perfectly fine running on regular fuel,” says Kevin Riddell, manager with the research firm LMC Automotive, adding that when premium is called for, “it's not necessarily [for] the fuel economy itself—it's more of the power aspect.”

In other words, premium can help automakers meet stricter efficiency standards while delivering the power some drivers demand. People are “used to a certain power level in their vehicles,” says Gary Pollak, program manager for the industry engineering association SAE International. “Manufacturers are trying to meet that power level while still trying to use design to increase the fuel economy.”

Both Riddell and Pollak note that car computer systems have become sophisticated enough to sense what type of fuel is coming into the engine. So while a sensitive driver might feel a slight downgrade in performance using regular fuel in a premium-recommended engine, cars that don’t require premium fuel are still going to run just fine without it.

Since an overhaul of U.S. octane levels isn’t likely anytime soon, automakers are looking at a whole host of ways beyond engine design to improve fuel economy (check some of them out in this photo gallery). Pollak notes that lighter materials and improved aerodynamics are two potential sources of efficiency gains. As for downsized engines coupled with turbochargers, he says, “I think the trend will continue.”

The story is part of a special series that explores energy issues. For more, visit The Great Energy Challenge.

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