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Temperatures, Pump Prices Rise Together

With spring a month away, the annual increase in gasoline prices won’t be far behind.
February 21, 2014

​PITTSBURGH – The cold, harsh winter has kept more than the ground frozen — gasoline prices have stayed pretty much the same, too, the Pittsburgh Post-Gazette reports. But with the official start of spring a few weeks away, prices are breaking lose and beginning to inch upward.

The U.S. average per gallon of gasoline jumped more than a nickel over the past week to reach $3.36. Analysts predict that upward trajectory will continue. As usual, the culprit is a bump in crude oil prices as concerns about supply jacked the cost of crude over $100 per barrel for the first time this year. “By and large, the recent rally is certainly about oil prices rising,” said Patrick DeHaan, senior petroleum analyst for GasBuddy.com.

However, those costs haven’t yet trickled down fully to the pump. “Retail margins tend to go down when gas prices go up,” said Jeff Lenard, NACS vice president of strategic industry initiatives. “That's because of competitive pressures — nobody wants to blink first.”

Usually, late February is when gasoline prices climb because refineries start to prepare to switch to summer fuel blends. “At its core, this is about environmental regulations,” said Lenard about the rules governing gasoline blends. “That's all good. I don't think anybody's arguing against environmental regulation. But it just complicates the system.”

Because refineries also conduct routine maintenance in the spring, supplies are squeezed even tighter. “It's not just a light switch,” said DeHaan. “It's a process” that adds about 50 cents to the cost of gasoline.

AAA predicts the switchover to summer fuel blends will push the national average to between $3.55 and $3.75 a gallon, with prices hitting the highest around Memorial Day before slowing down. “We've seen these trends over the last few years,” said Bevi Powell, senior vice president of AAA East Central.

Read more about what the future of fueling will be in the 2014 NACS Retail Fuel Report.