Leaded Gasoline Fast Becoming a Thing of the Past : Industry Trend Is to Market Only Unleaded Fuel at Southland Stations
Leaded gasoline, which has virtually vanished in parts of the East and Southeast, could go the way of the Edsel in Los Angeles if other major oil companies follow Atlantic Richfield Co. and Unocal Corp. in dropping the less popular grade to make room for pricier unleaded gas.
Arco, Southern California’s leading retailer, will announce plans Tuesday to drop its leaded regular gasoline Sept. 1 in Southern California and replace it with a new unleaded fuel, said Arco spokesman Albert Greenstein. Arco is belatedly following the lead set in 1986 by Unocal, which replaced leaded regular with a 92-octane premium unleaded fuel in all of its service stations.
Arco declined to say what grade of unleaded fuel would replace regular gasoline.
Other major oil companies that dominate the Southern California retail market have so far been reluctant to drop leaded fuel, even though they may have dropped it in markets east of the Rockies. Leaded gasoline accounts for 12% to 21% of Los Angeles-area gasoline sales, compared to about 10% in the rest of the country, in part because older cars last longer in the West, analysts said.
But analysts and dealers expect that other oil companies will eventually follow suit, particularly with the shrinkage of the area’s fleet of pre-1975 automobiles that use leaded gas.
More Expensive
“What you’re seeing here is that the number of cars in California that use leaded regular gas is shrinking, and that it’s not really cost-effective at some point . . . to carry leaded gasoline,” said oil industry analyst M. Craig Schwerdt at Seidler Amdec Securities Inc. in Los Angeles.
Owners of old bombers needn’t panic, however. Dealers said new grades of unleaded gasoline--which have non-lead lubricating additives--will power older cars as well as leaded gas, provided that the octane is high enough.
The only catch: Unleaded grades are generally more expensive than leaded regular in Los Angeles. At the end of June, the average price of regular leaded gasoline in Los Angeles was $1.08 a gallon, compared to $1.13 for regular unleaded, $1.26 for mid-grade unleaded and $1.31 for premium unleaded, according to a survey by Whitney Leigh Corp. in Tulsa, Okla.
The move away from leaded gas is part of a national trend toward multiple grades of unleaded, said oil industry analyst McDonald J. Beavers with Whitney Leigh. One chain offers as many as six grades of unleaded, he said.
More typically, gas stations--such as those selling Unocal--will dump their leaded grades and carry three unleaded gasolines: an 87-octane regular, an 89-octane mid-grade and a 92-octane premium. In Southern California, Unocal recently began selling a super-premium 100-octane unleaded racing fuel at three locations, but has no plans to expand that.
In Los Angeles, the typical gas station carries an 89-octane regular leaded fuel and two unleaded grades: 87-octane regular and 92-octane premium. Arco, which pioneered self-serve, no-credit service stations and cut-rate fuel, shaves an octane point off its premium fuel to undercut the competition.
Greenstein declined to say whether Arco’s new gasoline would be a middle-grade unleaded fuel comparable to Unocal’s 89-octane unleaded gas, as rumored among Arco dealers and analysts. But he did say the new fuel was being introduced in an effort to improve air quality in the basin. The company plans to unveil the product Tuesday at an Arco station in El Monte.
Arco will continue to sell leaded fuel at stations in Arizona, Washington, Oregon and Nevada, Greenstein said.
A mid-grade unleaded fuel would be a logical choice, given the recent flattening of demand for premium unleaded grades in the wake of huge retail price hikes. “We saw last year and early this year . . . a very strong demand for premium unleaded,” said Thomas Wallin, executive editor of Petroleum Intelligence Weekly, an industry newsletter.
Price Sensitivity
“But when gasoline prices really moved up this spring . . . the price (of premium) got a lot higher relative to regular unleaded, and consumers responded by going back to regular unleaded or to some of the newer mid-grades,” he said. “That’s something that I think surprised the oil industry a little--how price-sensitive they were.”
Oil companies have been jockeying for position in the highly competitive gasoline market recently. Last week, Chevron announced that it would replace its current 92-octane premium unleaded fuel with a new 92-octane product designed to better remove engine deposits. In the spring, Texaco said it would replace all of its gasoline grades this summer with reformulated fuels aimed at improving engine performance.
