Summer must be around the corner because gasoline prices are on the rise (again). And even though Minnesotans on average pay less than their neighbors – that could quickly change if the proposed Line 3 pipeline replacement isn’t built.
Obviously, we all pay at the pump – and some people definitely pay more than others – depending how much driving you (or your family) do each week. What we don’t think about is that increased gasoline prices also get passed along on in the price of goods.
If it costs more to deliver milk, cheese, and bread to the grocery store, you can count on a higher grocery bill, restaurant check or even a higher price for your child’s hot lunch at school. The same is true for many of the products we use and consume, the higher the transportation cost – the higher the total bill.
While some are quick to point the finger at retail gas station owners and assume collusion, the real reason gasoline prices are on the rise is simpler than that. Just like the ingredients we buy at the store have varying prices tied to transportation costs, the ingredients in gasoline do too.
There are two main conditions that have to be met by refiners when they produce gasoline blends for our cars – they need to have the right amount of octane and Reid Vapor Pressure (RVP). Of the two, the octane content is probably what most people would recognize since we see it posted at the pump as Regular 87, Mid-grade 89, and Premium 91.
The octane number doesn’t give a car better power or performance, it is a rating designated to specify what type of gas is needed for specific types of car engines to perform at their best. Typically, the higher the octane number, the more expensive the gasoline.
RVP is designed to reduce emissions, especially during summer ozone months. We don’t usually see it listed on the pump because RVP changes depending on the season. In the summer months, the RVP specification is harder to attain and is tied closely to the price of oil.
So it’s true, gasoline does get more expensive as summer approaches because that’s the time of year when refineries beginning making the more expensive summer blends.
Along those same lines, a change in the price of oil – the number one ingredient in gasoline – can cause the price at the pump to rise too. Not to mention the 100’s of different ingredients that also come from “cracking” and are used in the various fuel blends.
But if America is now the number one oil producer in the world, why would gasoline prices rise?
Well, just like the price of the delivery of goods can cause bills to go up, so can the price of the delivery of oil. And Minnesota is a perfect example of what could happen if a critical oil pipeline in the area goes offline.
Enbridge Energy has proposed building a new pipeline to help ensure the safe and efficient delivery of oil to refineries so they can continue making gasoline for consumers and businesses. Some have suggested the existing pipeline be removed where it is and replaced, and while that idea is well-intentioned, it would shut the line down completely for as short as 16 months. That’s a long time to have no, or slow, delivery of oil. Significant delays would almost guarantee higher gasoline prices for Minnesotans and the consequences that come with it.
So if gas prices are already rising, Minnesotans need to ask (and prepare) themselves – are you ready to pay more for gasoline and the price of goods they consume every day?