Published: June 17, 2024 By

Less than two months ago, Colorado’s gas prices were the second-lowest in the country at $3.16 a gallon for unleaded fuel. As of mid-June, they’re still 16 cents below the national average at $3.29, but federal mandates triggered by severe pollution in some counties may push prices higher this summer—by 50 cents or more, according to some estimates, or by only a few cents.

Sanjai Bhagat

Sanjai Bhagat

On June 1, nine counties along the Front Range began selling reformulated gas, a fuel blend that burns cleaner and releases fewer smog-forming emissions, as required by the Clean Air Act for high-ozone areas. It’s also more expensive than conventional gas: Nationwide, the average is about 25 cents higher as of mid-June. The Environmental Protection Agency now requires reformulated gas to be used in parts of 17 different states and the District of Columbia.

How reformulated gas will affect prices this summer is still unclear because the price difference depends on availability and other market forces. Gov. Jared Polis, who unsuccessfully fought the requirement, says the blended fuel could increase gas prices by 50 cents or more, while the EPA estimates the impact will only be a few cents.

Other factors also play into what drivers will ultimately pay at the pump this summer and beyond. CU Boulder Today spoke with Sanjai Bhagat, a finance professor in the Leeds School of Business, about what to expect.

What’s happening with gas prices this summer?

This growth in Colorado gas prices is a reflection of what's happening internationally. If the price of oil goes up, the price of gasoline goes up in Colorado and indeed nationally. International oil prices depend upon global supply, which could be impacted (decreased) by the conflict in the Mideast. Global supply would increase if the government revenue needs of oil-producing Middle Eastern countries increase. Global demand is impacted by the economic growth in oil importing countries like China.

Oil prices are volatile. They were very high in 2008 and in 2022,and they’ve come down but are still pretty high.

Is reformulated gas, and the potential higher prices that come with it, something Coloradans should expect going forward?

This is a decision for Colorado’s elected county and state leaders to make. Reformulated gas sold in a county will lead to somewhat cleaner air in that county. But winds blow, especially in Colorado. Air pollutants from neighboring counties and states will also impact the air quality in that county.

Indeed, regarding global climate, the carbon emissions from the large Asian countries will have a much bigger impact than the reformulated gas in a particular Colorado county. Equally important, the higher price of reformulated gas will further strain the household budgets of middle-class, blue-collar Colorado families.

How much should consumers expect to see prices rise due to reformulated gas?

I’ve seen that additives could add another 40 or 50 cents per gallon. There is a tradeoff we are making: Higher gasoline prices and better burning gasoline can lead to somewhat cleaner air in that county. But when a person goes to a gas station and fills up, the gas station meter doesn't ask,do you value clean air, or would you like to pay 40 cents less per gallon?

Some people are living on a shoestring budget and literally surviving month to month. They don't have a lot of slack in their budget. Already, they are stretched because of inflation.

And so if the price of gasoline goes up by 50 cents per gallon—and many of these workers cannot work from home like many white-collar workers—they still have to drive in most cases...If they have to spend that much more, something’s got to give, somewhere. They're already cutting their food budget to the bone.

So the real cost, or the increase in the cost of gasoline because of the mandates, is not going to be felt by the people who are fairly well off in our state.

Are there any other wild cards that could affect the price of gas this summer?

If the current administration were to encourage/allow American energy companies to increase their exploration and production for oil and gas (and, if these companies believe that this policy will not be reversed after a short time), the price of gasoline would fall in Colorado and nationally.

CU Boulder Today regularly publishes Q&As with our faculty members weighing in on news topics through the lens of their scholarly expertise and research/creative work. The responses here reflect the knowledge and interpretations of the expert and should not be considered the university position on the issue. All publication content is subject to edits for clarity, brevity anduniversity style guidelines.