OPIS Blog

Why Do Gasoline Prices Climb in the Spring? A Look at RVP

As the weather warms up with summer on the horizon, US gasoline prices will likely follow the season’s temperatures and start the cyclical rise as well.

Why does gasoline typically cost more in warmer weather months?

One of the biggest reasons for the price change is RVP, or Reid Vapor Pressure. It’s a measure of gasoline volatility. For those technically inclined: the number is the absolute vapor pressure of a liquid (in this case gasoline) at 100°F (37.8°C) as determined by the Reid method. In layman’s terms, it’s the ability of gasoline to vaporize so it can be used in your car’s engine – which changes with the outside air temperature.

That seasonality is a big part of the reason gasoline gets more expensive as temperatures increase. The lower the RVP, or the lower the volatility, the more expensive it is to make on-road gasoline. The summer months, when ambient temperatures are higher and gasoline evaporates quicker, require a lower pressure. In colder temperatures, gasoline with a higher RVP is preferred for winter driving.

Apart from car performance needs, the US Environmental Protection Agency, or EPA, sets standards for summer RVP levels to reduce emissions from evaporating gasoline, which can contribute to smog.

Part of understanding RVP is understanding how gasoline is made.

Gasoline isn’t just refined and ready to be put into your car’s gas tank. It must be blended with multiple components to make something that is able to be used on the road – like baking a cake with many different ingredients. And all those ingredients – or blending components in the gasoline-making world – must add up to a final product that you can put in your car, meeting all the specifications that make sure it’s up to snuff. And all those components affect the final product in different ways.

For example, take butane – a popular component for blending gasoline in wintertime. Butane is an inexpensive way to increase the octane (which means the resistance to knocking or uncontrolled ignition within a car’s engine) in your blend of gasoline. However, butane also increases the RVP level, so it is mainly used in the winter months, when RVP specifications are high.

So how does this affect the cost of gasoline, from the retail station to the wholesale racks to the big bulk gasoline markets?

Those less expensive (and sometimes more plentiful) blending components like butane, which can be used during cooler weather, help to keep the price of gasoline down at the pump. But as the weather gets warmer, some of those components aren’t going to be able to be used and more expensive options will have to be utilized.

Typically, consumers start to see prices head higher in the spring and early summer as blends make their way to the pump gradually as the weather warms – with timing that can vary by region. The change at your local gas station can depend on several factors besides the change in RVP, like local margins, competitive factors, etc.

But upstream, those changes start much sooner than they do in the retail sector. In the rack markets, where marketers go to load up their fuel trucks, usually the specification shift happens in spring as markets across the country start to supply the lower RVPs (LRVP). In 2024, OPIS Rack Reports will start to reflect LRVP starting as early as April 1 and continue through September 15 for most areas. The EPA mandates that terminals are fully switched over to summer-spec fuels by May 1, but refiners often start the process earlier.

Every city in the US is required to switch to a 9.0-lb. RVP gasoline in the summertime, with several areas across the country requiring even lower (and more expensive) RVPs. For example, the Sparks/Reno rack in Nevada will only show 7.8-lb. RVP products and the Detroit, Michigan, rack will only show 7.0-lb. RVP material.

Even further upstream from the rack markets, in spot markets, where large volumes of incremental material change hands (i.e. trades of 5,000 – 25,000 bbl or more), the RVP shift takes place even sooner.

As of March 1, 2024, California CARBOB gasoline has already moved to a 5.99-lb. RVP gasoline for the summer. East of the Rockies, Group 3 is showing an 8.5-lb. RVP specification, while Gulf Coast markets are showing a transitional, 11.5-lb. RVP grade product to help downstream customers blend tanks to lower RVPs but will see summer-spec gasoline appear in early March. Chicago and New York Harbor markets are still showing a winter-grade, 13.5-lb. RVP, summer grades of gasoline making their appearance later in March.

RVP transitions play a large role in the changing price of gasoline, as regulations must be met to have viable gasoline product for use at the pump. But there are a myriad of other factors that can mitigate or exacerbate any of those changes – including geopolitical influences, price movement of futures contracts, weather events, regional supply disruptions and refinery issues, to name just a few.

OPIS provides several tools to help keep abreast of the changing prices and regulations, such as the OPIS Spot Ticker, spot market reports, rack reports and retail data, as well as alerts for breaking news that can influence the price of gasoline.

Tags: Gas & Diesel, Rack Market