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Fuel Card

There are only a few short weeks left of the hot summer sun before temperatures begin to dip. While some look forward to fall’s changing leaves and chillier nights, many fleet owners look forward to the lower gas prices. Here, our fleet fuel card company shares an article from Forbes contributor Robert Rapier that discusses fall gas and why it’s cheaper:

“Fall arrives next month. Along with it comes relief from the heat, and usually at the gasoline pump as well.

It isn’t simply that demand for gasoline drops after summer driving season. Gasoline is also cheaper to produce after summer, for reasons I explain below.

There are many different recipes that can be used to make gasoline, but the final product has to meet certain specifications. One of those is related to how quickly the gasoline evaporates, and that is influenced by the composition and the ambient temperature.

Regulating Smog

Gasoline vapors contribute to smog, so the Environmental Protection Agency (EPA) regulates gasoline blends by putting seasonal limits on the Reid vapor pressure (RVP). The RVP specification is a measure of the tendency to evaporate; the higher the vapor pressure the faster the evaporation rate.

Normal atmospheric pressure is around 14.7 lbs per square inch (psi) at sea level. As liquids are heated, the vapor pressure of the liquid rises until it reaches atmospheric pressure — at which point it boils.

Thus, vapor pressure is a function of both the substance and its temperature. Under normal atmospheric temperatures water is a liquid because its vapor pressure is well below 14.7 psi. It still evaporates (i.e., it still has a vapor pressure), but slowly.

The same phenomenon applies to gasoline. As the temperature increases, the vapor pressure rises. Thus, if gasoline blends remained exactly the same from winter to summer, the evaporation rates in summer would be much higher. That would greatly increase smog.

So, EPA reduces the RVP in summer. The specific limit varies from state to state (and tends to be more restrictive in congested areas and warmer locations), but 7.8 psi is a common RVP limit in much of the U.S. in the summer months.

Fall Means Cheaper Gasoline

In September, the RVP specifications begin to be phased back up. This lowers the cost of gasoline production by allowing the blending of more butane, which is cheap relative to most other gasoline blending components.

Butane has an RVP of 52 psi, which means pure butane is a gas at ambient pressure and temperature. But it can be blended into gasoline, and its fractional contribution to the blend roughly determines its fractional contribution to the overall vapor pressure. As long as the total blend does not exceed normal atmospheric pressure (again, ~14.7 psi) butane can exist as a liquid in a gasoline blend.

Butane can’t make a large contribution to summer blends without driving the vapor pressure above the limit. But when the limit increases in the fall, it becomes feasible to blend larger volumes of butane.

Butane is cheap and abundant. Butane is a component of natural gas liquids (NGLs), the production of which have boomed along with natural gas production. Butane routinely trades at a discount of more than $1/gallon to gasoline, so gasoline blenders are happy to blend as much in as they possibly can.

So fall not only brings lower demand, but it opens up the gasoline supply to a cheap and abundant blending component. That’s why prices tend to fall as the weather begins to cool. And as summer approaches, the RVP specs tighten back up. The amount of butane that can be blended drops, just as summer driving season starts to pick back up. That’s why gasoline prices conversely rise by Memorial Day.”

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