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Odd Inconsistencies in March Pricing

The American Automobile Association reports gas prices have dropped significantly over the last month, though the market remains exposed to significant risk. According to the Lincoln Journal Star:

“…regular unleaded gasoline was selling for just under $3.72 a gallon on average in Lincoln as of Monday. That’s 7 cents less than a week ago and three cents cheaper than a year ago. However, it’s 17 cents higher than a month ago.

That’s not a whole lot of relief, considering the huge surge in prices to start the year, but there is likely to be some more coming in the next couple of weeks.

AAA Nebraska spokeswoman Rose White said oil and gas prices have been very volatile and unpredictable lately, but signs point to prices dropping further in the next week or two. Crude oil prices have fallen about $8 a barrel in the past month, and prices dropped below $90 a barrel Monday for the first time this year. White also said there was an additional two-cent drop in wholesale gasoline prices on Monday.”

At the same time, these price moves are not what analysts would generally expect heading into the summer. The Christian Science Monitor explains some of the cyclical moves in seasonable pricing:

“Two critical specifications that need to be met for each gasoline blend are the octane rating and the Reid vapor pressure (RVP). Octane rating is important for avoiding engine knocking. But the octane rating for a gasoline blend is consistent throughout the year, and is not the reason for the seasonal price fluctuations.

The RVP spec, however, does change with the seasons and this change can have a major effect on the price of fuel. The RVP is based on a test that measures vapor pressure of the gasoline blend at 100 degrees F…

In the summer, when temperatures can exceed 100 degrees F in many locations, it is important that the RVP of gasoline be well below 14.7 psi. Otherwise, the fuel may build pressure in fuel tanks and gas cans, and it can boil off lighter components in open containers. Gas that is vaporized ends up in the atmosphere and contributes to air pollution.

Therefore, the Environmental Protection Agency (EPA) has declared that summer gasoline blends may not exceed 7.8 psi in some locations, and 9.0 psi in others.”

However, it is important to keep these things in context. In Illinois, gas prices were higher at the beginning of March than they ever have before. The Chicago Tribune reports:

“AAA said Monday that has prices in the state started at their highest point ever for March, with drivers paying an average of $3.92 per gallon.

The average price of gas has risen by 59 cents per gallon in Illinois since the beginning of the year, a record acceleration.

Beth Mosher, a spokeswoman for AAA Chicago, said the sharp spike is due to a decline in refinery production and downtimes for maintenance. Refineries often perform maintenance at this time of year as they transition to produce summer gasoline blends.

Those summer blends are to meet higher environmental standards during the year’s heavy drive times. They’re also more expensive than those blends produced in the winter, so AAA warns that the region won’t get relief from increasing prices any time soon.”

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