July 22, 2014

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Price Gouging or Seasonal Effect?

We always hear the "winter to summer blend" argument every year when gas prices go up in the spring. Here's some history.

Every year, when the temperature goes up-and some years, like this year, when it doesn't-the gas prices go up as well.

We hear the explanation: it's because oil companies are switching from winter to summer grades.  A partial explanation is: they have to shut down for a time to do that.

It is a process that is fairly new, according to GasBuddy.com. But its history preceedes the concern about skyrocketing gas prices which began in earnest in 2000.  (By the way, George W. Bush is often blamed for that.  In 2000, Bill Clinton was still president.)

“It’s important to remember why it began,” Patrick DeHaan, senior petroleum analyst with GasBuddy.com, said in a recent news release.  “The summer gasoline requirement was a critical part of the Clean Air Act. It was approved with overwhelming support by Congress and signed into law by President George H.W. Bush in 1990. At the time, the three major environmental threats were acid rain, urban air pollution, and toxic air emissions. That’s why the Environmental Protection Agency (EPA) regulates the volatility of conventional gasoline sold at retail stations during the summer smog season (June 1- Sept. 15) to reduce evaporative emissions that contribute to smog.” 

There you go. A Democratic-controlled Congress approved the act in 1990, and it was signed into law by a Republican president.

People will continue to pooh-pooh all this.  They will blame it on price gouging on the part of oil companies and sometimes retailers. They will blame it the Obama Administration, at least as long as it is in office. 

GasBuddy.com also notes gas prices usually begin to fall after Memorial Day, which, as of this writing, is this coming weekend. The lone recent exception was in 2009.  My memory says that, that year, gas prices had begun a slow rise after a steep fall during the recession the previous fall.

So, if history is a guide-as it usually is-we probably only have a few more weeks at best to ride this out.

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