But what did he mean when he said that? This week, lots of news outlets are beginning to look at the prices at the pump for retail gasoline and diesel. As a result, there has been a sort of renaissance in the media as they are only now beginning to understand the mechanics involved in pricing retail fuels.
Beginning in the Spring of 2000, retailers in certain "out of compliance" states from an emissions standpoint were required to adjust their gasoline formulations to reduce the effects on air quality.
The adjustment comes in a measurement called Reid Vapor Pressure, or RVP. RVP is a measure of how fuel evaporates at a given temperature. For example, summer blend gasolines have a lower RVP to prevent evaporation when temps rise. The goal here is to prevent as much unhealthy ozone as possible and reduce smog. We have all seen it, and this is a way to try and reduce the effects on the environment and help us all breathe better.
To counter this, the Biden administration is pushing to reduce/eliminate fossil fuels from our fuel supply. The concept, while understandable in concept, falls short. Any rational thinking business person considers their market conditions. Are they ready for a transition? Will there be a price disruption, how long will the effects of the proposed change be felt, economically, and so on. These are, but a few of the questions business folks must consider as they contemplate a wholesale change in inputs.
The problem we face is boiled down to one simple concept, trust. The current administration is so hell-bent on changing the energy landscape that no one did the economic analysis to model the effects on the economy, from a change from fossil fuels to electricity. We simply do not trust the motives here because steps were left out, key fundamental steps.
Needs analysis were not conducted and the overall economic impact, forget about what effects recovering from a pandemic or a Russian invasion had on prices. The work was not done. They were simply ignored, as it appeared, they have only a short window to accomplish their goals, and kill the fossil fuel economy to replace it with, an already overburdened electric grid system.
The Latest Update On fuel Prices
Just as fast as they ran up, wholesale gasoline fell slightly this past week. Still, many believe this will be just a temporary setback as we move toward the "Summer Blend" to meet the environmental conditions brought by warmer weather. Prices will rise in 18 mandated U.S. States to address air quality.
Refiners, right about now, are beginning to change their formulations to be ready for the "2022 Drive Season". Beginning at the end of April each year, gasoline retailers are transitioned to the more expensive gasoline blends that meet the requirements from the EPA for summer fuel emissions.
These summer gasoline blends, on average, add between $.18 and .22 cents per gallon to the retail gasoline price. Then, in mid-September, we shift back to the winter blends, and the price should fall by roughly the same amount, depending upon supply and demand. If we see a .18 cent add in the Spring, don't expect to see that same decrease; when we switch back to the winter blends, the two are not tied to each other.
Timothy S. Snyder, Economist
Tim is an accomplished economist with a deep understanding of applied economics in energy. We encourage you to visit Matador Economics and learn more about Tim. While there you can sign up for his completely free, Daily Energy Briefs and Weekly Quick Facts.