Setting aside the quality of the fuel, the engine will not be hurt with lower octane fuel as long as the variable timing has the range to adapt. Since the engine retards timing for lower octane fuel, performance and mileage will be less.

Conversely, higher octane will improve mileage and performance as long as the variable timing is capable of increasing the timing enough to utilize the benefit of higher octane.

Variable timing eliminates spark knock so the engine is not harmed. If you use lower octane fuel and the result is spark knock that means the engine requires higher octane fuel because the variable timing does not have the capability to adjust to the lower octane.

BMW does not maximize engine performance. That is the reason aftermarket tunes can garner additional performance. A performance tune will usually include advancing the timing and if the engine does not already require high octane fuel it probably will with the performance tune.

That said, if the timing advance is too extreme it will be detrimental and cause performance to decrease and/or damage the engine. As an example, If an engine is turbo- charged, supercharged or has nitrous, a custom tune that retards the timing can be necessary to safely utilize the boost even using 104/106 octane racing fuel.

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X5 4.6 2002 Black Sap, Black interior. 2013 X5M Melbourne Red, Bamboo interior
Dallas