One of the topics I like to address in this column is personal finance. Wealth-building requires money for investments, and many people will insist to me that they don’t have extra money to invest. Yet I often see people wasting money that they could be investing.

A Personal Finance Question

For example, this past week, in a personal finance forum on Facebook (NSDQ: FB), someone posed the question:

“Can we talk gasoline? Regular vs premium. Does it matter? My husband says yes for his vehicle, a 2017 Toyota Tundra. I don’t know and wonder if it is worth the extra cost.”

My answer to the question was by far the most popular in the thread. That’s because I am a chemical engineer who formerly worked in a refinery and blended gasoline. So I know a lot about this topic. I will elaborate here on the answer I provided there.

A few years ago a study by AAA concluded American drivers had wasted more than $2.1 billion during the previous year by using premium-grade gasoline in vehicles designed to run on regular fuel. That’s a lot of money. It’s money I would rather see put to work in the markets.

The Facts on Premium Gasoline

Let’s talk about some facts on premium gasoline. The word “premium” doesn’t mean the fuel is better. This is the mistake many people make. Premium is a reflection of the octane of the fuel, which is a measure of how easily the fuel will pre-ignite when compressed in a cylinder.

Because higher-octane fuels are more resistant to pre-ignition, they are used in high-performance engines with higher compression ratios. That enables better performance and higher fuel efficiency than in engines with lower compression ratios. Using a lower-grade fuel in such an engine can result in knocking and pinging as the fuel ignites too early, and this can damage the engine.

Different companies do indeed use different additives in their gasoline, and energy content in gasoline does vary somewhat from company to company (and from summer grades to winter grades). But that’s not a factor in defining premium gasoline.

Note that premium gasoline doesn’t necessarily contain any more energy or any better additives than cheaper gasoline. In fact, octane is often boosted with ethanol, and that contains lower energy content than gasoline. So you could actually be lowering your fuel efficiency if you are using premium gasoline when it isn’t required.

Unless you have a vehicle that requires premium gasoline, you are probably wasting your money if you are buying it. A higher octane rating doesn’t make it any better for your engine than the cheaper stuff. If, on the other hand, you have a problem with engine knock, you might be using a lower grade of gasoline when you should be using premium.

The bottom line is that you should only use premium gasoline if your vehicle requires it, or if you have a problem with engine knock. If you don’t fall into those categories, save yourself some money, and invest it into the stock market.

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