Increased Demand

The basic principle of Economics which is law of supply and demand applies here. If the supply is more and demand is less, we get the product at less price where as if the supply is less and demand is more, we have to pay more to get it as demand outweighs supply. In summer, demand for gasoline spikes up resulting in the increased cost. Many people go for vacations in summer and this increases the use of vehicles which obviously results in increased demand for gasoline. This causes a hike in the price of gasoline.

Decreased Supply

Crude oil is not the same oil we pump into our vehicles. We get only 19 gallong of gasoline after refining 40 gallons of crude oil. Cost of the crude oil is the highest portion of the cost of the gasoline. The supply of crude oil fluctuates from season to season depending on various factors. Crude oil is exported by countries which have rich sources of it. These countries distribute oil to different countries. Since the demand for oil increases in summer, the supply fluctuates and these countries supply oil irregularly. So, some countries get higher supplies where as some countries get lower supplies. This increases the price in the countries where the supply is less.

Use of Different Blend in Summers

Many of you may not be aware of it but fuel companies use different blend in summers and winters. It means the fuel you pump into your vehicle is not the same in every season.

According to a regulation from EPA, to reduce the vapor pressure and thus to reduce pollution, oil companies use different blends in different seasons. This regulation is highly helping in reducing the pollution but it is also causing a hike in the price of oil in summers.

The main reason for increased price of oil in summer is that the oil refinaries shut down their refinaries to switch them temporarily to new blend. Since the refinaries shut down, there will be a dip in the supply and this ultimately results in price hike.

There are other factors which also influence the prices of oil and they are distribution and marketing, refining costs, taxes, political issues, and national events. When all the factors occur at the same time, the resultant hike in price is very high.