Why do Gasoline prices always go up in the summer?

Question

As soon as the warm weather hits (late March, early April), gas prices ALWAYS go up and then drop back down again in the Fall. This happens EVERY year

Does it cost more $ for the oil companies to make Gasoline in warmer weather?!? Or are they just scamming us, knowing that more people drive during the summer so they can increase profits?

Answer 1

Gasoline increases in price in March and April because refineries go down for annual maintainance during the spring. While it may seem weird that they all go down during the same period, it's really very simple. The home heating oil season, which is far more important than gasoline, has recently ended and the refineries are at the slowest point of the year, in terms of output. Normally, gasoline demand is soft in the spring, as folks aren't really travelling much yet. This shutdown process means that the product coming out of the refineries is more valuable, since there is less available time to produce gasoline.

This past spring was exceptional. There were problems at a few refineries which prolonged or caused additional unplanned shutdowns. Demand for gasoline was abnormally high this spring, which combined with lower output from the refineries, caused prices to spike higher than normal. Spring is actually the highest seasonal price for gas in a normal year.

To add to this, we still have not recovered from the drain Katrina put on national reserves. Demand has been so high that it's going to take years at this rate to build up oil reserves to the point they were prior to Katrina.

Once the refineries all come back on line, higher demand due to summer travel keeps gasoline prices elevated. During the summer, refineries are also preparing for the upcoming winter by producing millions of barrels of home heating oil. Heading into fall, travel slows down again, which softens demand and refineries should have built up a nice cushion heading into the home heating oil season. Prices recede and usually stay low until the cycle repeats the following spring.

There is no way to scam you. If my company charges one penny more than the next guy, you're going to switch stations and we sell less gasoline. If we sell less, that means the terminals where our product is stored is will not be able to receive the next scheduled batch from the refinery and the piepline could shut down. That becomes very expensive for us, so we're careful to forecast how much each area can receive. If we're wrong, we either have to find someone willing to buy it from us, find somewhere else along the pipeline we can use it, or shut down the pipeline.

Oil companies are making lots of money upstream (towards the source) of the refining level right now.  Comapnies that produce lots of crude are selling it at a profit right now.  The only other point is at the refining level.  That's because there isn't enough refining capacity in the US.  Every refinery's time is more valuable, so they can charge more for what they produce, it's simple economics.  If every car company in the US shut down except Ford, new Fords would become very valuable, and anyone wanting a new car would pay dearly.  

Nobody, and I mean nobody, is making more than a dime a gallon at the retail level and most retailers are making less than a nickel a gallon.  The profit at the station is in coffee, lottery tickets and cigarettes.

Edit:  To support Fred's statement, there are, at my last count, 142 "flavors" of gasoline nationwide.  Counties and cities get into the act and the smaller the batch made at the refinery, the higher the cost per gallon.  Next time your local yokel politicians try to pass some environmental act, ask them if they're going to subsidize the cost of production that the companies are sure to pass along to the consumer.

Answer 2

Your second guess is the most correct one. It is the law of supply and demand. There is more demand in the summer, so they jack up the prices and blame it on some other external factor. They blame unrest in the middle east, weather and countless other factors. Everytime there is a major world event you will notice, at least temporarily a price increase.

Answer 3

I am not so certain you can state that prices always do anything consistent in any given months.  If that were so, there would be a way to corner those prices and hedge on future price calls based on that data.  Indeed, if you go to the United States Government which posts the historical indexes your initial thought is not validated by the facts.

So, you are not being scammed.  In the end the price of gas is what everyone is willing to pay for it.

However you can manage your gasoline budget.

Answer 4

Uh, because people drive more in the summer? Basic economics - the law of supply and demand.

Answer 5

More people drive in the summer, so the price of gas goes up.  This isn't scamming, it's called demand and supply, and it's the way prices are set for anything in the market.  If they didn't raise prices to account for the increase in demand, there would be a shortage of supplies.

Answer 6

more people are going to be out driving around enjoying the warmer months and going on vacations...you can always tell when its a holiday, when its summer, or when there is a special event going on in your area...gas prices will go up

Answer 7

the companies that in charge knows people will travel and need fuel at some point during the summer so they raise gas prices . this is litterally highway robbery

Answer 8

The anti smog summer blend is more expensive, and people tend to drive more in the summer thus driving up demand and prices.

Answer 9

People travel and go on vacation in the warmer seasons. Don't you have any common sense?

Answer 10

demand is greater in the Summer

Answer 11

people go on vacation more in the summer and to the beach a lot

Answer 12

There are two solid answers to this question:

1) In the summer the demand of fuel goes up due to the higher demand with more and more people going on vacation. Also, there tends to be more road construction going on, and the equipment and trucks require more fuel than in the winter.

2) There is a different blend of fuel in the summer. Summer blend fuels tend to have more additives which help reduce emmissions. The production numbers that they use are taken from sales the previous year. With the demand increasing every year, they have to produce more on the spot, which costs more since they have to make a special batch while they're producing the winter blend fuel.

Answer 13

Just about everyone has answered this question correctly - it's supply and demand. It's not scamming in any way. Without replying to demand by raising or lowering prices, oil companies would find themselves with unmanageable gluts and shortages.

An interesting sidenote is that oil refineries have to mix at least 100 blends of gasoline. Each state has its formula for summer gasoline and winter gasoline and they're all a little different.

Answer 14

Because the gas and major oil  companies know that during the summer people do a lot of traveling and driving so they know people need their gas and have no other choice to pay for expensive gas prices

Answer 15

This is a result of supply and demand. In the summer there is more demand and therefore the price increases. It actually costs more to manufacture the winter grade gasoline.