The glut of winter-grade gasoline is gone and so are the artificially low prices that helped clear it from the market.
As refineries move to spring- and summer-grade blends gasoline prices are rising as they normally would, but with a bit more bite than in previous years.
The average price of a gallon of regular unleaded gasoline on Jan. 6 in the Iowa Quad-Cities was $1.88 per gallon. On Friday that same gallon of gasoline was selling for an average of $2.49 a gallon, according to figures supplied by GasBuddy.com.
In the Illinois Quad-Cities, the average price of a gallon of regular unleaded on Jan. 7 had fallen to $1.94 per gallon. On Friday, the cost for that same gallon of gasoline also was averaging $2.49, according to GasBuddy.
Patrick DeHaan, senior petroleum analyst at GasBuddy.com, said the Midwest and Great Lakes states have been hit with a bit of a double whammy.
“It’s been a quick run-up,” DeHaan said Friday.
The average price of a gallon of regular unleaded gasoline in Iowa has risen an average of 52 cents from its lowest average price in January.
In Illinois, the average price of a gallon of regular unleaded gasoline has risen an average of 56 cents from its lowest average price in January.
Part of that issue was that there was a glut of winter-grade gasoline throughout the region, including Iowa, Illinois, Michigan, Ohio, Indiana and Wisconsin, he said.
As a result of that glut, the price was lowered to get rid of it.
That glut, he said, “forced refiners to offer hefty discounts of gasoline.”
“What better way to get rid of it than with cut-throat prices,” DeHaan said.
There was no place to store it as refiners face the annual spring deadline when they change gasoline from winter-grade to ultra-clean gasoline for the spring, DeHaan added.
That is a mandate by the Environmental Protection Agency in the 1990s, he said. “When the EPA deadlines roll around they don’t want the possibility of winter gas in the system,” DeHaan said.
Part of the glut may have been due to the harsh winter the Midwest experienced, he said.
The change to ultra-clean gasoline and then later to a summer blend is part of the Clean Air Act. That act forbade the use of additives such as MTBE, or methyl tertiary-butyl ether, because it contaminated ground water, and lead also was taken out of gasoline.
The change in gasoline blends during the spring and summer, DeHaan said, keeps the air during the warmer months from being bad.
“The issue also is that this transition from winter-grade gasoline is going on at a time when the refineries are conducting maintenance,” he said. That means less fuel on the market.
While prices seemed to shoot up, what made it look so bad is because prices got artificially low, he said. “The discounts ended so there was an artificial surge in prices.
But the surge in prices happens every spring, but maybe not as dramatically.
“Prices go up in the spring and down in the fall, year in and year out,” DeHaan said. “I always say that Valentine’s Day is the last day of cheap gas. We get the cheaper prices at the end of the season just like retailers do.”
A person who buys a bathing suit in April will pay a higher price than if they purchased that same suit in August, he said.
Prices likely will rise another 15- to 30-cents a gallon on the high side before eventually going down through the summer, he said.
“I think for Iowa the state average for a gallon of regular unleaded should not hit $3 unless something develops from here on out,” DeHaan said.
The wild cards, such as violence in the Middle East, production decisions by OPEC and hurricanes in the Atlantic, are too difficult to predict, he added. But if things remain stable then so should gasoline prices.