Retailers and their consumers are all tired of high fuel prices? Most are not aware that we pay more during summer months for cleaner fuel?

July 21st, 2008

Most of us probably do not pay attention to the fact that gas prices rise each and every summer. The reasons are many

Most of us probably do not pay attention to the fact that gas prices rise each and every summer. The reasons are many, but primarily it is because summer fuel is more expensive to produce.

We all watch the price of oil on the open market, and its resulting impact on the economy as well as the price we pay at the pump. There are however a host of other reasons why the price of gas at the pump goes up during the summer for everyone. We all know that demand during the summer is higher do to more travel as a result of family vacations. Additionally, oil companies tend to conduct maintenance of their refineries in the spring which can also limit production and put pressure on supplies during a time of high demand. What many people are not aware of is that the fuel sold during the summer is actually different and more expensive to produce.

So, the fuel supply is different in the summer than it is in the winter. This began in 1995 as a result of the Reformulated Gasoline Program, which was established through the 1990 Clean Air Act Amendments. The (EPA) Environmental Protection Agency started the RFG program in order to reduce pollution and smog during the summer season which runs from June 1st to Sept. 15th.

There are a number of estimates as to the impact to consumers during summer months as a result of the increased production costs of summer fuel that range anywhere from 1 cent to as much as 15 cents per gallon. This author would bet on the later.

If you don’t like paying $4 per gallon, just wait a couple of months. Demand will fall, refineries will convert to winter fuel, the ozone will take a negative hit, but you’ll have a few more pennies or maybe even dollars to spend during the holiday season.

Oh, buy the way Retailers, August may be a good time to start thinking about contract buys for the next six months or longer. Lower demand plus a long term commitment equals potentially lower costs for your transportation needs.

I look forward to your comments.

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