Monday Brain Tease: Which gasoline would you buy?

[TConnolly]

Here is the background scenario:

After a long and painstaking effort engineers at the South Fork Oil Refinery have tuned the gasoline blending process to what they believe to be industry leading performance and precision in control of the octane number. They are confident that the octane number control at their competitor, The North Fork Refinery, is no where near as good and is highly variable. Both refineries are using the same suppliers. The engineer's pat themselves on their collective backs for their ingenuity.

Micro-mart has a contract to purchase gasoline from South Fork Refinery. Across the street from Micro-mart is Pico-mart, which has a contract to buy gasoline from North Fork Refinery. Due to their proximity to one another Micro-mart and Pico-mart are locked in a fierce price war which has reached a stalemate with each one selling gasoline at the same price.

If the general public understood South Fork Refinery's precision octane control, which -mart should see a decline in sales? Why?

If the owners of the -mart that is loosing sales understand South Fork's precision octane control and North Fork's variable octane control how might they improve their competitiveness?

Lets see your answers first - then read ahead.

(scenario inspired by one of this months trade rags)

 

[Mark-]

Stalemate.

In general, people do not care about the octane rating. This has been going on for years with my gas has better detergent, special blend to prevent knocking, etc.. Has it really won any customers? Maybe a few. When I have talked with people about the price of gas, as long as the price is near the other stations, the next factor they consider is convenience. Unless you have a car that has a special need for a certain, in range, octane I call it a draw. My2c.

Of course I could be all wet.

 

[dmroeder]

I'm with Mark, most people don't even know what Octane is for, so I doubt they would care.

Most people only consider price and convenience.

 

[Eric Nelson]

Start selling diesel?...



-Eric

 

[Kent Hostetler]

My guess --

Micro-mart should see a decline in sales. Octane rating at the pump is a minimum rating, so the public would understand that South Fork Oil Refinery produces gasoline at exactly the octane they are paying for. Since most people want "somethin' for nothin'", they will buy from Pico-mart because they expect to get higher octane for no extra money.

..at a loss as to what to do about it...although if the gas stations were in PA, Micro-mart would dilute their gasoline since PA Bureau of weights and measures doesn't test for octane - they only care about making sure you get the volume you are paying for.

 

[TConnolly]

My guess --

Micro-mart should see a decline in sales. Octane rating at the pump is a minimum rating, so the public would understand that South Fork Oil Refinery produces gasoline at exactly the octane they are paying for. Since most people want "somethin' for nothin'", they will buy from Pico-mart because they expect to get higher octane for no extra money.

You are on the right track - people will be happy to get higher average octane for no extra money, all other things being equal. But on the flip side, most don't care enough about higher octane if it will cost them any money.

So the hypothetical South Fork refinery engineers have improved their product to the detriment of sales. If only they and their managers and the pico-mart managers understood whats going on, they could turn it around. The question is, in a market where fortunes are made on fractions of price, will that engineering effort really pay off? Or will it be an improvement with a negative economic benefit?

 

[Mickey]

Quality of your product does not matter, its how good your marketing is.
A good ad campaign works wonders. South Fork needs to "Talk the Talk".

 

[FrancisL]

The North Fork Refinery should see a decline in profits because higher octane costs money and due to the variability in their octane, along with the statutory requirement to provide at least the octane that they claim to be selling, they will have to sell a more expensive product for the same price.

 

[DickDV]

The assumption that higher octane somehow represents higher quality, higher performance, higher efficiency, or lower operating costs is false.

In fact, I have seen studies where the best gas mileage is acheived where the octane is the lowest a particular engine can use without pre-ignition. Higher octane slows the burn rate and results in very slightly lower efficiency in that particular engine.

 

[Homer_BL]

You americans still use mostly gasoline, not diesel?

 

[rdrast]

The assumption that higher octane somehow represents higher quality, higher performance, higher efficiency, or lower operating costs is false.

In fact, I have seen studies where the best gas mileage is acheived where the octane is the lowest a particular engine can use without pre-ignition. Higher octane slows the burn rate and results in very slightly lower efficiency in that particular engine.

100% true. Use the lowest octane number you can. Ethanol makes matters even worse (efficiency wise) by a significant amount.

 

[monkeyhead]

You americans still use mostly gasoline, not diesel?

Yep... Most of our refining capacity is geared towards it and there's additional taxes on diesel since it's primarily used by heavy rigs and vehicles that put more stress on the roadways. Diesel used to be cheaper, but it's neck and neck with gasoline now that ultra-low sulfur content is required.

That said, some of us opted to run out and buy German turbo-diesel passenger cars when we realized the efficiency benefits. I like getting 40+ US mpg and still having some style (sorry Prius - you're ugly).

 

[Homer_BL]

That said, some of us opted to run out and buy German turbo-diesel passenger cars when we realized the efficiency benefits. I like getting 40+ US mpg and still having some style (sorry Prius - you're ugly).

In my country (Bosnia and Herzegovina) there is at least 60% of a diesel passenger cars (mostly German)

Gasoline98 is 1,15Euro/liter, Euro5 diesel is 1Euro/liter. I personaly have a German CDI passegnger car, with 2150ccm/150hp engine, which consumes 5,7l/100km extraurban, to 8,5l/100km urban-extra traffic jam. I do not complain, thats very good.

P.S. Sorry for my metric (SI) units

 

[Homer_BL]

I drive a lot, 50.000km/year, so comparing to similar gasoline engine and price, I 'earn' every year 3000Euros cca.

 

[TConnolly]

Just two octane points can raise the price of a gallon of fuel by ten cents to fifteen cents. North Fork has to meet minimum octane requirements, so its variability has to be above the minimum - meaning that North Fork is giving away product. If the managers at South Fork and at Pico-mart understand that they should be able to negotiate a lower wholesale price, giving Pico-mart a slight margin advantage and a chance to break the price stalemate, thus boosting the volume of sales of Pico-mart and South Fork.