Tired Of The Gasoline Price Yo-Yo?

t rudnicki

By Tim Rudnicki, Esq.

Historical price charts tell some ugly stories about the average retail price of gasoline.  According to GasBuddy.com, the price for a gallon of regular gasoline snapped from approximately $3.48 per gallon to $3.70 in early June 2012.  As we follow the data forward to January 2013, we find a steep drop to $2.94 until we are snapped back up to a whooping $4.29 per gallon.  Now, during the last few days of May, the gasoline price yo-yo is dropping back to about $3.89 per gallon.

This yo-yo effect in the price of gasoline, hitting the top and dropping down and doing it all over again, is easy to spot when the data is plotted on a chart.  Information conduits for the petroleum industry, however, would like for us consumers to be content with the stories about “supply tightness” due to the switch from winter to summer gasoline or refiners diverting supplies to “take advantage of higher prices” in the Great Lakes states.  Is this the first time refiners have experienced a change of season? Am I supposed to take comfort in knowing refiners are simply chasing the dollar in another part of the country?  Perhaps the more interesting story is what the data, rather than talking-heads, tells us.

Despite the occasional drops in the price of gasoline, the trend line for the last 10 years has been shifting upward.  The numbers contained in these historical price charts are, in part, about our energy past, present and future.  If we base predictions on the trend line, the future will clearly include even higher gasoline prices.  Given that so many factors, such as the trading price of crude oil and the petroleum refiner control of production and distribution, are beyond our individual control, what can a consumer do about the yo-yo price of gasoline?

Professors Xiaodong Du and Dermot J. Hayes studied the impact ethanol production has on gasoline markets.  Their findings are astounding.  Although the price for a gallon of regular gasoline is high now, it could be $1.69 per gallon higher without 10% ethanol!  In short, the multi-year research found that as more ethanol entered the marketplace, it shifted the demand for petroleum downward and thereby helped to suppress the price of gasoline. 

Minnesotans definitely gain a pocketbook advantage by having 10% ethanol in regular gasoline.  Consumers can gain additional control over the yo-yo price at the pump by having more fuel choice options.  Right now, 2001 and newer vehicles, nearly 80% of the cars on the road today, can use a blend of 15% ethanol and 85% gasoline.  E15, as this blend is called, is one more fuel choice option that can further suppress the price of gasoline and help bring down the trend line because it is made from renewable ingredients.  If you don’t see E15 at your favorite retail station, ask for it so you can take advantage of its environmental benefits and start saving money at the pump.  

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