Traditionally, gas prices at their lowest during the first week of February and then begin to climb, often peaking right before Memorial Day. Seasonal gasoline demand is a factor, but there also are other market-related events that historically impact gas prices in the springtime.
Since 2000, gas prices have increased about 50 cents from the seasonal low at the beginning of February to the seasonal high in mid-May. Here’s a timeline of events that can affect gas prices during the first half of the year.
U.S. demand for gasoline is generally at its lowest during the first two months of the year, so refinery maintenance, known as a “turnaround,” is often scheduled during the first quarter. A turnaround is a planned, periodic shut down (total or partial) of a refinery process unit or plant to perform maintenance, overhaul and repair operations and to inspect, test and replace materials and equipment.
Refineries undergo turnarounds roughly once every four year so about 25% of refineries undergo a turnaround each spring. Another reason for scheduling turnarounds is that they allow refineries to retool for summer-blend fuels.
The U.S. Environmental Protection Agency (EPA) defines April to June as the “transition season” for fuel production. Refineries lead this transition and switch over to summer-blend production in March and April.
Gasoline blends used in the summer months are different than the blends used in the winter. In the winter, fuels have a higher Reid vapor pressure, meaning they evaporate more easily and allow cars to start in colder weather. In the warm summer months, these evaporative attributes would lead to increased emissions and the formation of smog.
There are also more fuels to produce during the transition season. In the winter months, only a few fuels are used across the United States. However, because of various state or regional requirements, 14 different fuel specifications are required for the summer months. Refineries must produce enough for each area to ensure there are no supply shortages, and that can complicate the production and distribution of fuels.
Summer-blend fuel is also more expensive to make than winter-blend fuel. First, the production process takes longer and, second, the overall yield of gasoline per barrel of oil is lower. These complexities add as much as 15 cents per gallon to the cost to produce these higher-grade fuels.
The May 1 compliance deadline for terminals fully purge their systems of winter-blend fuels is considered one of the biggest factors in seasonal price increases. This regulatory requirement can lead to lower inventories at the terminal, which also puts upward pressure on gas prices. It can also take fuels refined in the Gulf Coast several weeks to reach storage terminals throughout the country, which is why it’s important to have summer-blend fuel at terminals and storage facilities by May 1. This date is the most important reason that seasonal gas prices tend to peak in May.
In most areas of the country that require summer-blend fuels, retailers have until June 1 to switch to summer-grade gas.
Demand can play a role in elevating seasonal gas prices. Gas demand increases a few percentage points each month beginning in February and peaks in August. Total fuel demand is 10% to 15% greater in August than in February, and any stress to the system—such as a refinery or pipeline outage—can cause a supply/demand imbalance and affect prices.
As gasoline demand decreases and temperatures cool, retailers can switch to selling winter-blend fuel beginning September 15. While these winter-blend fuels are cheaper to produce, the complications of the switchover can result in a temporary bump in price. Weather conditions, such as hurricanes, can also affect gas prices in the late summer to fall months.
Unlike in the spring, the change to winter-blend fuel is not required. However, because winter-blend fuel costs less, retailers often sell the fuel blend to remain price competitive. Not all retailers begin selling this fuel on September 15; many make the switch when their inventories are low.
By the end of September, gas prices generally decrease as the switchover processes and demand continues to fall. And despite conspiracy theories, lower gas prices do not correlate to pre-election politics.
In California, the season for summer-blend fuels is longer than the rest of the country. Both Northern and Southern California’s summer-blend requirements run through the end of October. This exacerbated supply issues within the state in early October 2012, when fires at two large refineries limited state-specific production and caused wholesale and retail gas prices to spike to record levels.
Meanwhile, demand for distillate fuel (diesel fuel and home heating oil) begins to increase in September because of both greater diesel fuel demand related to the harvest and greater home heating oil demand because of the colder weather.
Summer-blend fuel requirements may be relaxed in times of emergencies or when potential shortages are possible.
In 2005, NACS worked with Congress to give the EPA the authority to waive certain regulations affecting the motor fuels system in times of emergency. The EPA’s immediate use of these waivers is critical to bringing the entire fuel supply chain into operation as quickly and safely as possible. For example, this flexibility allowed winter blends of gasoline to enter into the market in 2017 before the traditional transition date of September 15 in response to Hurricanes Harvey, Irma and Maria.