As noted in last post, gas prices always spike seem to spike in the spring. Why is that?
Well, there are several reasons. The first are the basic laws of supply and demand. With nicer weather, people tend to drive more, increasing the demand and thus the price.
The second is what is called the Seasonal Gas Transition. Taking effect in 1995, amendments to the Clean Air Act of 1990 mandated a different formulation of gasoline for the summer months, colloquially known as the ‘summer blend’ to cut down on pollution. Changing output from summer to winter blends of fuel is not as easy as flipping a switch. Rather, the refinery must often shut down completely in order make the change over.
In addition, the summer blend mandates a lower percentage of Butane in gasoline for environmental reasons. The Butane is replace with more expensive ingredients, further boosting the price.
The summer blend also reduces the mileage per gallon, further increasing demand on gas to travel the same distance.
Perhaps most troubling is that different areas have different blend requirements, meaning that surplus fuel in one area can not be easily shipped to a deficit area, resulting in potential large regional price differences and giving oil companies distorted market power than they otherwise would have. This could be easily solved by doing away with these variations entirely or at the very least parring them down to a more reasonable number.
The actual cost of the summer blend is difficult to calculate and as a result, there are a wide range of opinions as to the exact cost. Estimates range from $.01 to $.15 per gallon.