Gasoline Prices

     Why does the price of gasoline go up every spring?

     During election years and like this year with a new president the conspiracy theories come out of the woodwork as the theorists claim gasoline prices are engineered for political ends and in the end it is the president's fault. But the pattern has always been pretty much the same. 

     If you check the history of gasoline prices you can see that about 90 percent of the time gasoline prices go up between January and May. An exception was 2020 because of the plunge in demand due to the Covid-19 pandemic, but prior to 2020 gasoline prices had risen in the first five months of the year for more than 20 years in a row. 

     A lot of factors influence gasoline prices, but two critical specifications that need to be met are the octane rating and the Reid vapor pressure. Octane rating is important for avoiding engine knock, but the octane rating is consistent throughout the year so that's not the reason for the seasonal price increase. Lead compounds were once widely used to increase octane rating, but with few exceptions are no longer used. Other chemicals are frequently added to gasoline to improve its stability and performance characteristics, control corrosion and provide fuel system cleaning. It may also contain oxygen enhancing chemicals to improve combustion.

     The Reid vapor pressure specification, however, does change with the seasons and this change can have a major effect on the price. The RVP is based on a test that measures vapor pressure of the gasoline at 100 degrees F. 

     Normal atmospheric pressure varies with location, but averages about 14.7 lbs per square inch at sea level. In the summer, when temperatures can exceed 100 degrees in many locations, it is important that the RVP of gasoline be well below 14.7 psi to prevent a pressure build up in fuel tanks and gas cans. Therefore, the Environmental Protection Agency has ruled that the RVP of summer gasoline blends may not exceed 7.8 psi in some locations, and 9.0 psi in others. 

     The key considerations are the altitude and motor vehicle density of a specific location. More congested and hotter areas will tend to have a limit of 7.0 psi, while cooler climates are generally allowed to be slightly higher at 7.8 psi. Some areas, however, maintain a 9.0 psi limit throughout the summer. 

     Because of this refiners will start to reduce their inventory of winter gasoline ahead of the EPA's May 1st deadline which declares that all gasoline has to meet the stricter requirements. 

     The summer blend is costlier to produce is because it contains less butane which can be blended into gasoline in higher proportions in the winter because the vapor pressure allowance is higher. A typical winter gasoline blend may contain 10 percent butane, but it drops to 2 percent or lower in the summer. The higher butane allowance in winter means that winter gasoline is cheaper to produce. Butane is added back in greater volumes in the fall and in mid-September the RVP allowance starts to increase. 

     Additionally, in the summer the demand for gasoline increases and in the fall it decreases and this demand affects the price. And, of course, changes in the price of oil can affect gasoline prices.