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Stewarts Shops

Gas Prices Are on The Rise Again… But why?

04/30/18

You’ve probably seen the recent price changes at the gas pump and the media headlines for the rising cost of gasoline. We’re seeing some of the highest barrel pricing since 2014. This isn’t good news for anyone!

But why are gas prices going up?

There’s a number of reasons for the increase at the pump and we want you to know that we are doing everything in our power to keep the prices low. But unfortunately, there are many external factors that are out of our control. When you break it down, there are two main reasons for the price increase at the pump.

Reason #1:

There are so many key industry players driving up the cost. OPEC (Organization of the Petroleum Exporting Countries), refiners, speculators and economists all support higher gas prices.

OPEC favors production cuts. And when production is cut, supply is cut. And we’re seeing an increase in both international and domestic demand for crude oil.

When supply is down and demand is up, the price will increase. It’s simple economics. And to compound matters, refiners favor higher gas prices to improve their margins and economists always want a little inflation. Declining gas stocks aren’t helping either!

Speculators or commodities traders are also to blame. They buy oil and gasoline at the commodities futures markets. They purchase these gasoline contracts for future delivery and then sell their contracts at inflated pricing. Speculators never had any plan to take ownership of the gasoline, they are in the market for pure profit purposes, resulting in higher pricing for you—the consumer.

Reason #2:

All gas suppliers are required to switch to a summer grade of gasoline. This gasoline is more expensive to produce.

EPA air quality standards require suppliers to switch to a more expensive summer blend of gas to reduce air pollution with less fumes. Summer-grade gasoline has a lower volatility than winter-grade gasoline and is more environmentally friendly, limiting the evaporative emissions or fumes from vehicles into the air.

The switch to summer grade gasoline started in 1995 as part of the Reformulated Gasoline Program (RFG), established through the 1990 Clean Air Act Amendments. The Environmental Protection Agency (EPA) initiated the RFG program to reduce pollution and smog during the summer ozone season. Summer-grade fuel has a different Reid Vapor Pressure (RVP) than winter-grade fuel, which makes it more eco-friendly.

The summer-grade burns cleaner and replaces inexpensive butane with more expensive oxygenates, or fuel additives that are better for the environment.

This transition occurs gradually through the spring and results in an approximate .10 to .15 cent per gallon increase.

Here at Stewart’s Shops, we hate to see gas prices go up just as much as you do. While OPEC and refiners want to drive the cost up, we are trying to keep prices low while balancing the EPA summer grade requirements and rising costs. Rest assured, we’re doing what we can to keep prices down at the pump! We’ll continue to hedge our gas purchases to bring you the lowest prices possible.

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