Premium gas sales tank as fuel prices rise

[June 19, 2008]  MIAMI BEACH, Fla. (AP) -- Ernesto Evangelista prefers to pump premium gas into his seven-month-old Nissan Titan, thinking it makes the truck run better. But at a BP station just a few blocks from the sand of Miami Beach, the 33-year-old painter grabbed the handle for the regular, 87-octane gas to fill his tank on a recent Friday.

"Premium is just too expensive," he said. "Nobody can afford to fill up with premium anymore."

With rising fuel prices pushing the national average for premium to $4.48 a gallon -- about 40 cents higher than regular -- motorists like Evangelista are buying less of it, industry statistics show.

Demand for high-octane fuel is at its lowest in nearly a quarter of a century and is now primarily consumed by a core group of luxury vehicle owners -- and even some of them are putting lower-grade fuel into their tanks to save money.

In 1997, high-octane garnered 16 percent of the nationwide fuel market share, according to figures from the U.S. Energy Information Administration. Last month, premium had only 8 percent of the market. Last year, premium gasoline consumption fell to about 35.6 million gallons of gas per day, the lowest in 24 years, the agency said.

"We're down to the core, die-hard audience that believes they need 93," said Tom Kloza, publisher of the Oil Price Information Service, a New Jersey firm that provides petroleum pricing and news information.

Gas station owners say they are pumping so little premium that it can take three or four weeks to sell their high-octane inventory, as opposed to a couple of days for a delivery of regular gas.

"The reality is, when you're having to make a choice between food and fuel, all of a sudden you'll make a decision to give up the benefits of the higher product," said Sonja Hubbard, the CEO of E-Z Mart Inc., a Texarkana, Texas-based company that owns 307 convenience stores in Texas, Arkansas, Oklahoma, Louisiana and Missouri.

Premium gas is making up only 3.3 percent of E-Z Mart's gas sales this year, Hubbard said.

Gas station owner Rob Garrett of Centreville, Va., says the decline in premium sales hurts his profits.

"The shift from higher grade, higher profit products will decrease my margin," says Garrett, who estimates that sales of premium have decreased 10 to 15 percent since last year at his three gas stations.

Jessica Caldwell, an auto industry analyst with the car-buying resource Edmunds.com, says consumption of premium has fallen because people are driving less overall and more people are buying compact cars that don't need high-octane fuel. She points out that most premium fuel is 30 or 40 cents a gallon more than regular -- meaning that cutting it out would only save a few dollars per tank.

"It really doesn't add up to very much," she said. "It's more of a psychological thing. You're at the pump, and it seems like every time you hit a certain threshold, you cringe."

Some motorists feel they have no choice but to pump premium. The number of new models that manufacturers say should use high octane -- mostly luxury sedans and high-performance sports cars -- has risen from 166 in 2002 to 282 this year, according to the Kelley Blue Book, an Irvine, Calif.-based company that provides vehicle value information.

There's some debate over whether premium gas is really necessary for all but a few models. Consumer Reports wrote this month that motorists should not waste money on premium if their owners manual says the vehicle takes regular -- the car won't run better. The magazine also says many cars that are supposed to only use premium perform just as well with regular.

Judd Rosen, a 33-year-old attorney in Miami, says the dealer told him to put high-octane in his silver 2005 Range Rover. But the cost can be shocking -- a few weeks ago, it cost Rosen $100 to fill his tank.

"I took a picture of the price on the pump with my cell phone and e-mailed it to all of my friends," he laughed.

Melissa Hodge, 32, of New Lenox, Ill., alternates between premium and regular for her Infiniti G35 sedan.

"I know premium is better for my car, but with the economic times, I just can't do it," said Hodge, who commutes 50 miles a day as a salesperson.

The price of premium hasn't discouraged waiter Gregg Bernstein, 32, of Miami Beach, from gassing up with the good stuff. He owns a little red scooter that sips fuel.

"It costs $3 to fill the tank," he said. "I'd rather put premium gas in it and keep it clean."

[Associated Press; By TAMARA LUSH]

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