Posted in: Default,
by Patrick DeHaan on Nov 6, 2009 02:02 PM
Many people have noticed that gasoline prices regularly rise in the Spring months, in some cases, even before Winter is over. On the flip side, many notice that gasoline prices typically fall during the autumn months. Have you wondered why and never gotten a credible answer? Let's educate you.
It's quite simple once you sit down and think about it. Gasoline refiners, much like retail stores at your mall always are thinking ahead to what's next. Many times you see retailers bringing in Christmas decorations even before Halloween, and swim suits in stores starting in February for the Summer. Gasoline prices are much the same way, and there's a reason.
Every Summer, gasoline refiners must produce many different fuels that have many different ingredients. During the Spring, they begin to switch the refineries around to produce this Summer fuel so that there's enough to meet demand during the Summer. The concern always seems to be with adequate supply.
The run up in prices has definitely become more visible as well over the years (can you remember this happening 10 years ago?). Much of the reason for the increase in visibility is because there are so many new fuels that must be created, refiners must produce each blend, and have enough of every blend by early-Spring when travelers take to the roads. There in an increased cost to make the Summer fuel as well, so along with supply worries, gasoline prices rise in the Spring. Sometimes refineries have problems in the Spring, adding to the concern, further inflating prices.
The opposite takes place in the autumn. Each September, depending on where you live, pollution standards many time become relaxed, and refiners can produce a gasoline that doesn't burn as clean, but costs less. The reason prices go down during the fall is that refiners many times have left over fuel from Summer they need to get rid of. This starts the process in mid-September, depending on how much they need to get rid of. Another reason prices fall during the Autumn is because demand typically drops, easing any supply concern, and causing prices to drop. It didn't happen this year because we saw demand rise (compared to last year, but still lower than this past summer). That worried traders enough that they began buying fuel to cover for their customers. This pushed prices higher.
We're starting to see prices relax as there is less concern over supply lately, so hopefully we'll see prices drop to an average of $2.50/gal by late-November.