Gas prices reach summer peak, according to EIA

by Talk Business & Politics staff ( 125 views 

Gasoline prices are expected to remain lower than the May 28 price for the rest of the summer, and by September, are expected to fall to an average of $2.84 per gallon in the United States, according to the U.S. Energy Information Administration. A gallon of regular gas rose to $2.96 on May 28, and fell 7 cents to $2.89 per gallon in June.

By December, gasoline prices are expected to fall to $2.68 per gallon. Gasoline prices are often higher in the summer when gasoline demand is higher and federal and state regulations require the use of summer-grade gasoline, which is more expense to produce.

Since 2000, gasoline prices have reached a peak 10 times in or before June. The times that the prices have peaked after summer were in the event of a storm or other outages leading prices to rise. In September 2017, prices reached a peak after Hurricane Harvey caused supply disruptions and refinery outages.

The probability of regular gasoline prices reaching at least $3 per gallon fell from 36% on May 22 to 7% on June 7, according to the EIA. The probabilities are calculated using price data from the gasoline futures contract for July and the volatility that’s implied in the related gasoline options contract.

As of June 7, the July futures contract for reformulated blendstock for oxygenate blending (RBOB), which is the petroleum component of gasoline, was $2.11 per gallon. The options prices and volatility that’s implied in the contract had a 7% probability of exceeding $2.30 per gallon. Futures prices at this amount usually lead to a retail price of $3 per gallon when the contract expires, based on the markup of a gallon of gas that takes place between the futures contract prices and retail gas prices. On May 22, the RBOB price reached the highest level since late 2014, and the probability of gasoline reaching $3 per gallon was 36%.

As of June 25, the U.S. average for a regular gallon of gas was $2.83 per gallon. In Arkansas, the price of a regular gallon of gas has fallen more than 9 cents to $2.59, from the same time last month, according to the AAA. However, the price is up 57 cents, from the same time last year.