US gasoline prices begin to fall as regulations lessen

16 September 2013 21:32  [Source: ICIS news]

US gasoline prices begin to fall as regulations lessenHOUSTON (ICIS)--US gasoline Reid Vapor Pressure (RVP) standards have switched to cheaper winter blends, which should be a welcome relief to motorists as retail gasoline prices drop, an analyst said on Monday.

On 15 September, gasoline made its annual change from the pricier summertime 7.8 RVP blends to the heavier winter-grades at 11.5 RVP and higher, which are cheaper for refineries to produce.

US Environmental Protection Agency (EPA) regulations require gasoline to have a maximum RVP of 7.8 lb/square inch during the high-ozone season of 1 June through 15 September. These are the maximum standards for everyone covered by the regulations, including retailers and wholesale purchaser-consumers.

As the busier summer driving season ends, refiners are able to produce heavier, cheaper gasoline since there will be fewer cars on the road.

The higher RVPs typically signal lower gasoline prices.

Accordingly, reformulated blendstock for oxygen blending (RBOB) gasoline futures trading on the NYMEX, the basis for spot prices in the US, settled 5.30 cents/gal lower at $2.7166/gal on Monday.

This caused spot prices, which influence wholesale gasoline prices or the price that stations pay when filling their underground tanks, in the US Gulf, New York Harbor and Midwest regions to weaken on Monday.

Gas stations will eventually be lowering prices if the market closes lower,” said GasBuddy.com’s senior petroleum analyst Patrick DeHaan. “More importantly, the return of winter gasoline means the summer driving season is really over, as we’ve already witnessed by looking at paltry demand data from the Department of Energy.”

According to DeHaan, retail prices could be up to 15 cents/gal lower by November.

However, automobile organisation AAA said the average price of retail gasoline will remain above $3/gal for quite some time.

Tuesday marks the first time retail prices have stayed above $3/gal for 1,000 consecutive days since the streak began on 23 December 2010.

AAA forecasts the national average will remain above $3/gal for at least another thousand days barring a major economic recession.

“Paying less than $3 per gallon for gasoline may be automotive history for most Americans, like using eight-track tapes or going to a drive-in movie,” said AAA CEO Bob Darbelnet. “While a few lucky drivers may occasionally pay less than $3 per gallon, the national average is likely to remain more costly into the future.”

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By: Anna Matherne
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