The Oil Drum

32 comments on Refining 101: Winter Gasoline

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Nate Hagens on September 15, 2006 - 3:18pm

And that's the true tale of why gasoline prices fall back in the fall, and spring forward in the spring.

This refers to gasoline relative to oil (crack spread) but not directly to absolute gasoline prices as they rely on crude oil as the primary input.

If gasoline prices truly were that predictable to go down every fall, that would already be in the market by July or August - there are many years in the last decade when prices increased in the fall so this phenomenon is a tendency not a rule. I think oil has gone down 6 of the last 10 years from Sep to Dec - I'll have to check on unleaded.

Regarding fall vs spring pricing, there exists an active futures market for oil and natural gas out for 60 months. For unleaded gasoline however, the futures only go out until December of this year.

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Robert Rapier on September 15, 2006 - 4:13pm

This refers to gasoline relative to oil (crack spread) but not directly to absolute gasoline prices as they rely on crude oil as the primary input.

If gasoline prices truly were that predictable to go down every fall, that would already be in the market by July or August - there are many years in the last decade when prices increased in the fall so this phenomenon is a tendency not a rule.

Hey Nate, I made it to California. Just checking in from the business center in the hotel.

Not all of the inputs come from crude oil. That is part of the point. In the winter, the fraction of butane goes up, meaning that gasoline supplies increase every fall. Whether price rises for some other reason, supply always increases as the vapor pressure goes up because of the ability to put butane in.

That's all for now. Got to run.

Robert