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It's very easy to lament the astronomical rise in gasoline prices in the wake of the Hurricane Katrina disaster. We all watched in dismay last year as prices crept to over $2 a gallon, then were staggered as they soared to over $3 by Labor Day of this year. However, there is a bright side to this meteoric rise in fuel prices - the fact the using Premium Unleaded fuel is now a bargain, relatively speaking.

It's hard to remember, but just a bit over 3 years ago, gas prices were at an all-time low corrected for inflation. Regular could be had as little as $1.10 a gallon, and Premium commanded $.20 cents per gallon more. At the time, that twenty cents looked huge! That's over an 18% increase. Let's do the math:

If you drive 15,000 miles a year and get 25MPG, that's 600 gallons of gas. At 2002 prices, that fuel cost $659.40 for regular and $779.40 for premium, an 18.2% increase of $120.

Fast forward to post-Katrina 2005. With a cost of, say, $3.10 per gallon for regular, those same 600 gallons of gas now cost you $1,859.40. Ouch! No wonder people seem to be driving more slowly (traffic jams notwithstanding), selling those behemoth SUVs, and seeking hybrids and other high-mileage cars.

Ah, but now consider premium fuel once again. The extra cost for premium continues to be $.20 at most stations I've seen, with some a little higher, $.25 or $.30 more. What does this mean to your bottom line? Well, if the "premium premium" is $.20, then your annual fuel cost goes up by only that same $120 to $1.979.40, or just a hair over 6%!

Obviously, if the premium price differential is different for you, if you drive more or less than 15,000 miles a year, or if your mileage is higher or lower than 25MPG, then you can easily adjust these calculations to suit your own situation. The point is that even as people are abandoning it, bumping up to premium fuel is, relatively speaking, not the same hit it was a few years ago. Does it matter that much if you spend $45 or $48 on a tank of gas? Not to me, if it means extracting as much performance as possible from my car.

I will leave a detailed analysis of the benefits of premium fuel to another time. The fact is that many manufacturers recommend or require premium, and now more than ever it may be false economy to ignore that advice.

Oh, and as they say, your mileage may vary.
 

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not only all of that, but if you factor in the reduced mpg when using regular, regular gas actually costs more per distance driven than premium does. the higher the price of gas, the more regular costs in a car that requires premium.

right now I estimate that it costs me about $3.50 more per tankful to buy regular than to buy premium, accounting for the distance the two different tankfuls my car could drive with each.
 

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That's funny, I came to this realization this morning when I was filling up.
 

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As a math and finance geek, I have to tell you one thing ...you're trying way too hard to make this argument. Oh, your comment:

ralphb said:
Obviously, if the premium price differential is different for you, if you drive more or less than 15,000 miles a year, or if your mileage is higher or lower than 25MPG, then you can easily adjust these calculations to suit your own situation. The point is that even as people are abandoning it, bumping up to premium fuel is, relatively speaking, not the same hit it was a few years ago.
Is absolutely incorrect. The price differential between regular and premium is NOT a function of your car's MPG rating, the number of miles you drive in a year, or anything else. Think about it ...

Previous pricing (by your example):

Regular $1.10/gal
Premium $1.30/gal
Dollar difference = $1.30 - $1.10 = $0.20
Percentage difference = $0.20 / $1.10 = 18.2% - (you came up with this number also, but were concerned with miles driven and whatnot)

Today's pricing (still your example):

Regular $3.10/gal
Premium $3.30/gal
Dollar difference = $3.30 - $3.10 = $0.20
Percentage difference = $0.20 / $3.10 = 6.5%

You can multiply by miles and all that ...but it doesn't change the fuel cost. For every 15 gallons, you pay an extra $3.00. That's all. What's different is your take on that $3.00 premium. Nowadays, it barely buys you an extra gallon of any grade of gasoline. A few years ago, it got you almost three extra gallons of low grade, or just about two gallons of good stuff. That's where the perceived difference really lies.
 

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Premium is the better value because it's more expensive, and the more gas I buy on my Amex, the more double airline miles I earn. :crazy:

See, rationalizing is fun :D
 

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I have a mobile/exxon gas visa card which gives me 3% credit for every dollar I spend in a mobile/exxon station. The credit only goes toward gas that is purchases from exxon/mobile.

No, here's the deal, the card gives 1% with non-exxon/mobile station purchases. I see 2 gas stations next to each other, One is Getty and the other Exxon. Price for premium in Exxon is $3.29 while Getty is 3.19 (10c diff). Using the card, which will give me more money back?
 

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veedubyo said:
I see 2 gas stations next to each other, One is Getty and the other Exxon. Price for premium in Exxon is $3.29 while Getty is 3.19 (10c diff). Using the card, which will give me more money back?
Is this a rhetorical question, or did they start giving driver's licenses to 6th-graders? :D

The Getty is the cheaper. Now factor this in: You have to make at least ONE Ex-Mo transaction a month to even be eligible for the total rebate that month. What do you do, hotshot!?
 

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Yes, I've been singing this logic for a year now! Why would anyone switch to lower grade now? However on the margin it still costs the same, so if you don't need it, now is no better of time to try it just for kicks. However if you do need it, and go to a lower grade you are hurting yourself more than when the prices were around a dollar.(because now you are wasting more expensive gas)

So traubenberg...you are right on...
 
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