This year's gasoline price spike has been steeper than normal. Here are the reasons behind the rise.
Fuel prices are displayed on a sign at a Phillips 66 gas station in Princeton, Illinois, U.S., on Wednesday, Feb. 6, 2019. Since the beginning of 2019, U.S. retail gasoline prices have risen by 26%. Photographer: Daniel Acker/BloombergAccording 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%.
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. This dynamic reverses in the spring when the RVP limit goes back down. By the start of summer driving season the RVP is back to summertime limits. Thus, the butane volumes have to be curtailed. Gasoline becomes more expensive to produce just when demand becomes highest. That almost always leads to rising gasoline prices in the spring.
A couple of weeks ago, multiple gas stations in Phoenix ran completely out of several grades of gasoline. When I inquired about the reason, I learned that it was because the floods had disrupted ethanol deliveries. Ethanol is mandated in the fuel supply, but it is also used to boost the octane. The higher octane grades were the ones in short supply.
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