Annual Spring Gas Price Increases
Let's consider the effect of EPA vapor pressure mandates on the price of gasoline. Energy Security Analysis Inc. senior consultant Mark Routt analogizes vapor pressure in gasoline to fizziness in soda pop. In the winter more fizziness (high vapor pressure) means that when you turn the ignition on a cold morning it sparks the gasoline and your car starts. However, in the summer you want "flatter" gasoline (less vapor pressure) because fizzier gasoline evaporates on hot days and contributes to smog. While EPA regulations help reduce smog, they also make it more costly to produce gasoline with lower vapor pressure. Lundberg estimates that summer blends can cost between 3 to 15 cents more to make than winter blends, depending on the exact formulation, time and place.
In addition, Routt pointed out that the regulations have produced several distribution bottlenecks that temporarily boost prices in the spring. "Everybody jams the exit at the same time," explains Routt. What he means is that gas station owners have essentially one week to switch from a winter blend to a summer blend. So in order to get their supplies in a timely manner they end up paying a premium of 8 to 12 cents per gallon to distributors and tank truckers.
In contrast, in the fall, retailers can switch over a period of weeks from a summer blend to a winter blend and so price spikes don't typically occur in the fall. Routt suggests that the EPA relax its vapor pressure regulations allowing retailers to more slowly switch to summer blends. However, he doubts that this policy could ever be adopted since it would characterized by activists as "an attack on the environment."
MP: Notice in the price chart above that there was an increase in gasoline prices last year about the same time as the price increase this year.