Gas Prices to Rise Again This Summer
So, here's the bad news...
Rumor has it that gas prices are expected to reach about $4.25 a gallon across the nation this summer, but analysts don’t expect them to remain there for very long.
There are apparently several factors that will cause the potential steep climb, from rising consumer demand to the escalating tensions between North Korea, Iran and other countries, including the U.S.
Some people do think the same way
Patrick DeHaan, a senior petroleum analyst with GasBuddy.com, advised that a peak in high prices could be seen in May, close to the Memorial Day weekend. GasBuddy.com is a website that tracks fuel prices.
The website’s 2013 gas price outlook estimates that prices could peak at about $4.20 per gallon, over the first major driving weekend of the season.
Gas Price in Fargo-Moorhead (North Dakota and Minnesota)
According to an AAA spokesperson, the highest price cited over 2011’s Memorial day was $3.69 per gallon, and that was in Arizona. And it’s already $3.79 Minnesota and $4.00 in Fargo, North Dakota as I am writing this (May 16, 2013 - Regular)
The spokesperson was quoted as saying that the increase to $4.25 a gallon is certainly possible, but they are not expected to stay at those high levels for a lengthy period of time.
Generally, when prices reach a point of about $3.75 a gallon, consumers start changing their habits, such as walking or biking, or reducing the number of trips they take. They go out less and don’t plan long-distance vacations.
Why? Why?? Why???
DeHaan explained that gas prices reach their peak in May, because the oil refineries switch to summer gasoline production on June 1. This switchover is a major reason that gas prices increase.
This increase is not because summer gas costs more to produce than winter gas; rather, the increase is due to the oil refineries having difficulty keeping up with the demand, DeHaan said.
According to the U.S. Energy Information Administration, the EPA (Environmental Protection Agency) requires that all oil refineries manufacture a different grade in the warmer months to reduce the levels of smog and ground-level ozone.
Oil refineries do not stock up on their summer-grade gas in the winter months, according to DeHaan. Some refineries have trouble meeting the demand when the warmer months come along and the driving season starts. The more refineries that struggle with keeping up, the tighter the supply will be, and hence, the higher the price will get.
Memorial Day :(
The switchover just happens to coincide with Memorial Day weekend, when many people take to the roads, off on their first trip of the season. This puts extra pressure on the refineries, at a time when they are already struggling to produce enough gasoline.
Could be Worsen, If...
Conflicts in Iran could also be contributing factor to an increase at the pumps. Iran is currently threatening to shut down (it is actually threatening to shut it down from last year) the Strait of Hormuz, which is a major oil passageway. It is the world’s most important oil transit checkpoint, with almost 20% of the world’s oil supply passing through the strait.
If Iran is successful in blocking the Strait, it could have a huge long-term impact on prices.
The Brighter Side :)
An improving economy is another reason for increasing prices. More people are going on vacation, and have jobs. They drive to work, and have more discretionary income, according to DeHaan.