Oil markets continue bouncing up and down, with today marking a bounce higher. Crude oil is up by roughly $1.50, and fuel prices are 3-4 cents higher – but overall, prices haven’t moved much in the past two weeks. Diesel prices have been between $2.11-$2.16 since Aug 30. Crude oil has been in an even smaller band between $68.50 and $69.99 (dividing by 42 to go from barrels to gallons, that’s a 3.5 cent per gallon range). Despite several up and down days lately, fuel markets have been stable. The exception is gasoline, which sank 15 cents on Sept 1 when future markets rolled to the October contract.
Keep in mind that the crude, diesel, and gasoline prices we share each day are really next month’s prices (called the “prompt” month), meaning that today’s prices are based on fuel delivered in October. Low-RVP summer-grade gasoline can be switched out for cheaper winter-grade gasoline on Sept 15, so the October contract (which, again, became the “prompt” month on Sept 1) is the first to reflect lower prices.
What does this mean for consumers? Fuel price speculators have already seen prices drop, but real, physical gasoline prices won’t change until Sept 15, when the EPA lifts the summer-spec requirements. Next week, expect a steep drop in physical gasoline prices as fuel stations and wholesale suppliers convert to winter gasoline. The EPA allowed the change to happen early in Louisiana and Mississippi due to Hurricane Ida, so the effect may be lower there.
The end of summer-spec gasoline also tends to correlate with falling summer demand. The kids are back in school and the weather is getting cooler, putting a damper on vacations and recreational trips. From September through November, refineries typically go offline for maintenance, taking extra supplies off the market. This is fine for gasoline, since demand is shrinking. But for diesel, which sees steady demand year-round, refinery outages can cause some supply tightness. Once the Sept 15 deadline passes, expect wholesale diesel prices to surpass gasoline and possibly move a bit higher as refineries go offline.