Already falling due to increased production and a boost in imports, gasoline prices could dip even more as refiners start selling less-expensive winter fuel blends later this week.
Gas stations nationwide will begin Friday to switch away from the summertime fuel blends that cut down on smog during the year’s hottest months but also add a chunk of change to the price at the pump.
The net effect could lead to a marginal drop in gas prices that are already trending downward, analysts said.
The Environmental Protection Agency requires that certain volatile chemicals in gas sold between May 1 and Sept. 15 are removed so they can’t evaporate in the heat and react with pollutants to create ozone, a main component of smog. Fifteen metropolitan areas also levy their own, stricter requirements in hopes of improving air quality.
“We believe that reducing the volatility of the fuel is one of the most cost-effective ways of achieving cleaner air across the country,” said Margo Oge, director of the EPA’s transportation and air quality program.
The blends cost about a cent per gallon more to manufacture, though the final price may jump more. Summer blends can cost 10 to 15 cents higher per gallon, said Phil Flynn, an analyst at Alaron Trading Corp.
The transition back to winter fuels often has a less dramatic impact on fuel prices.
“If there is any price effect, it will be dwarfed or masked by the changes caused by the drop in crude oil prices and a drop in gasoline demand,” said Jonathan Cogan, spokesman for the Energy Information Administration.
As oil production ramps up and summer driving season ramps down, prices are already beginning to drop. Average gas prices dropped to around $2.62 a gallon this week after reaching $3.04 last month, the Department of Energy reports. The agency said it expects average prices of $2.55 a gallon by winter, but some forecasters — including travel agency AAA — say such price levels are just weeks away.
The Gulf Coast refineries damaged in last year’s hurricane season have picked up production. Crude oil prices have dropped from more than $78 a barrel in July to less than $64 a barrel as OPEC confirmed it wouldn’t cut back its supply, and Iran soothed jittery traders when it signaled it would consider demands to stop uranium enrichment. The hurricane season, while not over, has not been as brutal as expected. And the fighting between Israel and Lebanon has stopped, easing concerns that the conflict could spread and affect oil production in the Middle East.
“The big risk factors going into the summer driving season are gone,” Flynn said.
Whatever impact the return of winter blends has, it will take time to translate into lower gas prices as refiners must sell off the last of their summer blends.
“You can’t just flip the switch,” said Jim Tudor, president of the Georgia Association of Convenience Stores.
And even then, there’s no certainty any savings will be passed on. Although Georgia’s summer-blend costs as much as 10 cents more than than winter blend, there’s no way to predict the sale price, said Richard Cobb, executive director of the Georgia Petroleum Council.
“There could be a few cents here or there,” he said of savings. “But I would say that any cents in that area certainly could be overtaken by world events, like Iraq or hurricanes.”
Regardless, signs of dropping gas prices are welcomed by station managers tired of being blamed for rising prices and drivers upset at spending a greater portion of their wages on the daily commute.
Eugene Shivers, a 60-year-old recently retired mechanic who enjoyed $2.50 per gallon prices at a downtown Atlanta Chevron station, said he’s just glad gas prices are sinking.
“I don’t mind where it’s coming from,” he said as he stood beside his SUV, “as long as it’s low.”