We have an additional reason to give thanks this year. Consumers are happy because the pump prices are falling a bit.
Each year, the summer months bring about higher gasoline prices. Higher demand and more expensive blends of fuel required by the Environmental Protection Agency drive the gasoline prices higher.
The reciprocal can usually be said of the winter months. Cheaper blends of fuel often bring these high summer prices down just a bit. This fall/winter, prices seem to be lower than usual. Well, it is not your imagination.
According to Gasbuddy.com, a respected online gasoline-tracking site, the national price for a gallon of gasoline today (low $3 range per gallon), has not been this low since February 2011 when the Libya crisis took place. Gasbuddy.com also says that around the nation, 15 percent of all gasoline stations are selling below or near $3 per gallon. This same time last year, only 1 percent of stations were selling gasoline below $3 per gallon. This aforementioned 15 percent translates to 35 states selling gasoline at this low price.
These dollar figures beg the question: Why? What is causing these low gasoline prices, lower than in the previous few years. According to CNBC’s Sharon Epperson, several factors are driving prices down.
These factors Epperson mentions are a chain reaction to one another. The price of crude oil is down to around $93 dollars a barrel. The price per barrel is down due to a swelling inventory thanks to the production from U.S. shale plays, and a decrease in demand in the present, therefore causing a rise in supply.
According to AAA, the decrease in demand can partially be attributed to a very mild hurricane season. A busy hurricane season can mean unplanned refinery shutdowns and thousands of residents fleeing their homes and thus needing gasoline. This hurricane demand was evident during Super Storm Sandy of 2012. Several refineries were shut down, therefore the supply was diminished and then the demand significantly increased. All of these factors led to higher gas prices for the East Coast as well as the rest of the country.
Finally, one of the last contributing factors for these lower prices is the cheaper blend of fuel allowed by the EPA that was earlier referenced. The EPA measures gasoline blends by checking the Reid Vapor Pressure. In the summer months, temperatures and RVP’s are higher, thus requiring a blend of gasoline that is more pure and a blend that will not boil off due to these high temps and pressures.
For the winter months, obviously the outdoor temperature is cooler and the RVP is lower, allowing for more butane to be used in the fuel blend.
Butane can be used because the threat of it boiling off and evaporating is gone due to the cooler temps and pressures. Butane is a cheap and plentiful additive to the gasoline blend.
The end result of this lengthy explanation is cheaper prices at the pump.
Clearly, other factors such as geo-political affairs, international wars and conflicts and natural disasters can also affect the price of gasoline.
So the next time you fill up your vehicle at the pump, remember, pump prices are not conspiracy driven; there are tangible variables that play into the price.