Posted in: Default,
by Patrick DeHaan on Sep 8, 2009 11:19 AM
Labor Day has come and gone, and so has the summer for that matter. With the summer driving season now behind us, can we expect gasoline prices to fall like they did last year? Let me answer that for you.
First off, let me describe the difference in fuels. Summer blended gasoline has a lower RVP (Reid Vapor Pressure) number than winter spec fuel and does not evaporate as easily, causing less vapors to be released, lowering pollution levels as millions of gallons are pumped and consumed daily. Winter fuel can have a much higher RVP number simply because there aren't as many laws regarding pollution in the cooler months. Winter spec fuel costs less to make because it contains more butane fuel which is cheaper than other products that go into lowering the RVP of summer fuel. This cost savings is passed onto customers, usually by October as refiners sell down summer fuel stockpiles.
In 2008, we witnessed the largest drop in gasoline prices ever. Gasoline prices dropped over a dollar in two months as a global recession became evident and stockpiles continued to increase sharply. In 2009, much has changed. The economy is on the mend, stockpiles have come closer to average, and OPEC has made cuts to production as oil prices plummeted. What will happen to gas prices this fall?
Fall is a bleak time of year for refiners and retailers. Gasoline demand falls as it becomes cooler and many refineries do maintenance because of poor margins between seasons. This year will not see prices fall like they did in 2008, but we will see a smaller price drop. Gasoline prices will be a bit more volatile this fall than years past as economies continue to recover. We're also dealing with a spat of economic data, a dollar that weakens and strengthens on a weekly basis, and OPEC quotas. It will be difficult to predict exactly where prices will go, but the U.S. average will remain between $2.39-$2.52 this fall. Canadian prices will average near 95c/L. Until there is clear direction in the economy, oil prices will likely trade between $67-$75.