Why Gasoline Pump Prices Are Spiking

This year’s gasoline price spike has been steeper than normal. Here are the reasons behind the rise.

According to data from the Energy Information Administration, during the first week of January this year the average retail price of gasoline was $2.24/gal. By mid-April, the price had risen to $2.83/gal — an increase of 26%.

Although gasoline prices usually rise between January and April — for reasons I explain below — this year’s rise has been particularly steep. There are three primary factors behind this.

Transition to Summer Gasoline

Every spring, gasoline must transition from winter to summer blends. Winter blends are cheaper to produce. The difference is related to the evaporation rates of the gasoline.

Gasoline vapors contribute to smog, so the EPA seasonally regulates gasoline blends. They do so by placing seasonal limits on the Reid vapor pressure (RVP). The RVP specification is based on a test that measures vapor pressure of the gasoline blend at 100 degrees F.

Vapor pressure is a function of temperature. As the temperature increases, the vapor pressure of a liquid rises. Thus, in summer it is important to keep the RVP of gasoline at a lower level than in winter.

In September, leading up to winter, the RVP specifications can rise as high as 15 pounds per square inch (psi) in some locations. This has a big effect on the cost of producing gasoline. Butane blending is the key.