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THURSDAY, AUGUST 20, 2026   |   SPECIAL REPORT & ANALYSIS

SPECIAL REPORT  |  FUELS, REFINING & THE PUMP

EPA Moves Winter Gasoline Up Two Weeks in Bid to Break $4 Pump Prices

Early RVP relief adds supply, but Iran and refinery constraints remain dominant

Analysis  ·  August 20, 2026

The Trump administration is reaching for another emergency energy lever as gasoline prices remain stubbornly above $4 a gallon: allowing higher-volatility, lower-cost winter gasoline to reach consumers about two weeks earlier than normal.

Bloomberg Government reported Thursday that the Environmental Protection Agency (EPA) will permit winter-grade gasoline containing 10% ethanol beginning Sept. 1 rather than waiting until the normal Sept. 15 end of federal summer gasoline restrictions.

EPA says the change could effectively add hundreds of thousands of barrels per day to gasoline supplies and provide additional downward pressure on pump prices.That is possible because winter gasoline is easier and cheaper to manufacture — and because refiners can turn a somewhat larger share of their available hydrocarbon stream into finished gasoline.

But the most important point is that this is a supply expansion measure at the margin, not a solution to the energy shock emanating from Iran and the Strait of Hormuz.

Figure 1. The two-week pull-forward. Refiners and terminals must meet low-RVP summer specifications from May 1; retailers and wholesale purchasers from June 1. Both normally run through Sept. 15. EPA’s action lets winter-grade E10 move on Sept. 1. Source: 40 CFR 80.27; EPA fuel waivers; Ag Policy & Markets Daily.

Why winter gasoline produces more fuel

The principal difference is Reid Vapor Pressure (RVP), which measures how readily gasoline evaporates.

During warm weather, federal regulations require lower-RVP gasoline because highly volatile gasoline produces more evaporative emissions that contribute to ground-level ozone and smog. For retailers and wholesale purchasers, the federal summer gasoline season normally extends from June 1 through Sept. 15. Refiners and terminals begin complying earlier, on May 1, so summer-specification fuel has time to move through pipelines and storage terminals.

Lowering RVP requires refiners to remove or limit inexpensive, highly volatile components such as normal butane. When the winter specification returns, refiners and blenders can put more of those components back into the gasoline pool. EIA notes that normal butane is particularly attractive because of its relatively low cost, but its addition raises gasoline vapor pressure.

Table 1. Summer versus winter gasoline: what actually changes. Sources: 40 CFR 80.27; EPA fuel waiver notices; U.S. Energy Information Administration; ASTM D4814.

That produces two benefits simultaneously:

▪  More gallons. Adding butane and other higher-volatility components expands the finished gasoline pool without requiring a comparable increase in crude-oil throughput.

▪  Cheaper gallons. Refiners can substitute less-expensive blending components for some of the more costly material required to make summer gasoline.

That is why EIA describes winter-grade gasoline as less costly to produce and notes that gasoline crack spreads normally decline as the market moves from summer to winter specifications.

So EPA is, in effect, trying to manufacture additional gasoline supply through regulatory flexibility rather than additional refinery capacity.

The arithmetic behind EPA’s claim is not exotic. Normal butane is limited to roughly 2% of the summer gasoline pool at a 9.0-psi standard, but can run to 5–10% once the winter specification returns. A U.S. finished-gasoline pool of roughly 9.5 million barrels per day therefore gains on the order of 350,000 to 550,000 barrels per day of blendable volume for every four to six percentage points of additional butane — which is precisely the “hundreds of thousands of barrels” EPA is describing. The same substitution lowers the blended cost of a gallon, because butane has traded at a steep discount to RBOB gasoline through this summer.

Table 2. The butane arithmetic: how a specification change becomes “hundreds of thousands of barrels.” Ag Policy & Markets Daily estimates using EIA gasoline production and blending-component data; assumptions shown are illustrative, not EPA figures.

That distinction is especially important now

U.S. refiners do not have much unused capacity to call upon. For the week ended Aug. 14, refinery utilization climbed to 97.2%, with crude inputs reaching about 17.4 million barrels per day. Gasoline inventories rose 688,000 barrels to 209.4 million barrels, but remained 5% below the five-year seasonal average. Gasoline demand fell to 8.7 million barrels per day.

Figure 2. No slack left in the system. At 97.2% utilization the U.S. refining fleet is running within roughly three points of its practical ceiling, while gasoline inventories sit about 5% under the five-year seasonal average. Source: EIA Weekly Petroleum Status Report, week ended Aug. 14, 2026.

Table 3. U.S. refining and gasoline balance. Sources: EIA Weekly Petroleum Status Report; EIA weekly retail gasoline prices, Aug. 18, 2026 release.

In other words, asking refiners simply to “run harder” has limited usefulness when many plants are already operating close to their practical limits.

EPA’s strategy instead allows refiners to get more gasoline out of roughly the same refinery system. That helps explain the administration’s assertion that the change could increase effective gasoline availability by hundreds of thousands of barrels per day. The gain is not coming from new refineries or suddenly increased crude production. It comes from expanding the pool of components that can legally be blended into finished gasoline.

Iran could overwhelm the benefit

The problem is that the gasoline market’s biggest bullish force is currently far larger than the seasonal-specification issue.

WTI crude climbed about 2.5% Thursday to roughly $88 a barrel, while Brent approached $94, their highest levels in more than three weeks, as markets reacted to renewed threats surrounding Iran and continuing disruptions to Middle East energy flows.

More importantly, the Iran conflict has become a refined-products problem as well as a crude oil problem.

Global refining capacity has been damaged or constrained across parts of the Middle East, while Ukraine’s attacks on Russian energy infrastructure have reduced another source of refined-product exports. Reuters estimates global refinery runs fell sharply in the second quarter, helping push gasoline, diesel and jet-fuel margins substantially higher.

That means Washington is fighting two price components simultaneously:

▪  The crude-oil price, which is being driven largely by geopolitical risk and constrained Middle East flows.

▪  The refining margin, which has widened because worldwide gasoline and diesel production capacity is unusually tight.

The winter-fuel waiver primarily attacks the second problem.

Figure 3. The waiver reaches one slice of the pump price. Crude accounts for roughly half of a $4.05 gallon and is the single largest source of this year’s increase; the refining component is where an early winter specification can bite. Ag Policy & Markets Daily estimates from EIA Cushing WTI spot prices, EIA retail gasoline prices and prevailing federal and average state motor-fuel taxes; refining and margin shown as the residual.

The decomposition matters for expectations management. Crude alone accounts for roughly $2.05 of a $4.05 gallon, and it is up about 50 cents a gallon from a year ago. The estimated refining-and-margin slice is up about 41 cents. Even a fully effective RVP action that trimmed the refining slice by a nickel would leave the pump price roughly 85 cents above last August.

It could push gasoline crack spreads lower by increasing the number of barrels eligible for the U.S. gasoline pool, but it cannot prevent pump prices from rising if Brent moves from the low-$90s toward $100 because the Iran conflict worsens.

Table 4. Two price problems, one policy lever. Component estimates as in Figure 3.

The administration is effectively creating a ‘regulatory barrel’

That may be the most useful way to view Thursday’s announcement. There is little spare refinery capacity. Building new refining capacity cannot happen quickly. U.S. crude production is already near records. And continued heavy use of the Strategic Petroleum Reserve carries its own strategic and political costs.

EPA therefore is attempting to create what might be called a regulatory barrel — allowing existing refineries, terminals and blenders to convert more available hydrocarbons into legally saleable gasoline.

That is potentially faster than virtually any other supply side measure available to Washington.

The regional distribution also explains why the effect will be uneven. PADD 3 and PADD 2 plants sit closest to abundant, cheap NGL supply and feed the pipelines that move product east and north, so the incremental butane barrels show up there first. California, which operates under its own CARB gasoline specification and a separate volatility program, will see comparatively little benefit from a federal RVP timing change — one reason West Coast pump prices are likely to remain the national outlier.

Figure 4. Where the regulatory barrel gets made. Gulf Coast and Midwest refiners control roughly three-quarters of U.S. operable distillation capacity and hold most of the butane and light-ends flexibility the early winter specification unlocks. Source: EIA refinery capacity data; Ag Policy & Markets Daily. Stylized map, not to scale.

EIA already expects refinery margins to remain elevated because of tight global product markets and says U.S. crude inputs have been running near the top of their recent five-year range. It also expects refinery runs to decline during September and October as plants enter seasonal maintenance.

That maintenance schedule makes the Sept. 1 timing particularly important. EPA is providing additional blending flexibility before refinery turnarounds begin reducing throughput.

Consumers could see some relief — but probably not a collapse

The national average gasoline price was about $4.07 per gallon in mid-August, according to AAA, roughly a dollar above year-ago levels and the highest August average on record. EIA’s weekly series put the Aug. 17 national average at $4.05, against $3.13 in the same week of 2025.

Figure 5. A year defined by the March shock. Retail gasoline began 2026 below $2.85, spiked with the Iran conflict, peaked at $4.50 on May 11 and has since oscillated around $4.00. The shaded band marks the two weeks EPA is converting to winter specification. Source: EIA weekly U.S. regular all-formulations retail gasoline prices; EIA monthly averages for 2025.

The normal move toward winter gasoline already tends to pressure prices lower in September. EPA is essentially pulling that seasonal price mechanism forward by about two weeks.

The result could be measurable.

Wholesale gasoline prices can react quickly because traders understand that higher-RVP material will soon become saleable. Retail prices, however, normally respond more slowly as higher-cost inventories already in tanks move through the distribution system.

So consumers should not expect an immediate 20- or 30-cent decline simply because the waiver takes effect Sept. 1.

Rather, the measure could knock several cents off what gasoline otherwise would have cost and — more importantly — reduce the risk of localized supply shortages or price spikes if refinery problems develop during the late-summer transition.

There is also an ethanol angle

EPA’s latest action comes after an unusual summer in which the agency repeatedly used emergency authority to broaden ethanol blending flexibility.

EPA’s current nationwide waiver allows production and distribution of a common gasoline pool containing 9% to 15% ethanol at a 10-psi RVP, with the latest 20-day waiver running through Aug. 28. Fuel already introduced into pipelines or certified before expiration may continue moving through the system until those volumes are exhausted.

The Sept. 1 winter-fuel action described by Bloomberg specifically concerns E10, so it should not be confused with the broader political fight over permanent year-round E15 legislation.

Nor is it inherently bearish for ethanol demand. E10 remains the overwhelmingly dominant U.S. gasoline blend, meaning additional finished gasoline production generally means additional ethanol blending as well.

But the episode again demonstrates something ethanol advocates have emphasized for years: RVP rules can materially influence both fuel availability and ethanol-market access. That could become another talking point as Congress debates whether to establish permanent year-round E15 access rather than relying on annual EPA emergency waivers.

A second EPA decision could land Friday: small refinery exemptions

Separately — and potentially far more consequential for the ethanol and corn complex — some reports surfaced Thursday that EPA on Friday could announce decisions on pending 2025 small refinery exemption (SRE) petitions under the Renewable Fuel Standard.

The pending queue stood at 34 requests in July. Some reports signaled a speculated change at the Department of Energy on how the agency defines economic harm — the threshold question that determines whether a small refinery has demonstrated “disproportionate economic hardship” from RFS compliance.

That definitional question is the whole ballgame. In its most recent round, announced Aug. 3, EPA decided six petitions from four refineries covering the 2023 and 2024 compliance years: one full exemption, two 50% partial exemptions and three petitions ruled ineligible. In doing so the agency reaffirmed that it defers to the Department of Energy scoring matrix “unless EPA’s consideration of other economic factors compels a different result,” and that it reads its authority to permit partial as well as full relief.

Possibly loosening the economic-harm test — for example, by giving more weight to RIN acquisition costs or by treating a broader set of financial metrics as evidence of hardship — would move petitions that currently fail the DOE matrix into the grantable column. That is how a 34-petition docket becomes a much larger exempted volume without EPA formally changing the statute’s language.

The 34 pending SRE petitions for the 2025 RFS compliance year do not translate into a publicly disclosed exact gallon figure, because EPA does not publish each refinery’s requested exempt volume. But EPA’s own projection gives us a very good estimate.

EPA projects 5.95 billion gallons of gasoline and diesel will ultimately be exempted for 2025. Applying the 2025 RFS percentages produces about 780 million total renewable-fuel RINs of exempted obligation.

For corn ethanol specifically, the better number is smaller:

• 2025 total renewable-fuel standard: 13.13% 
• Advanced biofuel standard: 4.31% 
• Implied conventional/D6 component: 8.82% 
• 5.95 billion gallons × 8.82% ≈ 525 million gallons 

So the 34 pending 2025 SRE requests represent roughly 520–525 million gallons of potential conventional ethanol demand, based on EPA’s current projected exemption volume.

The 780-million-gallon figure is the broader ethanol-equivalent/RIN impact, including advanced biofuels, biomass-based diesel and cellulosic fuel — not simply corn ethanol. EPA confirms that RFS obligations are expressed in ethanol-equivalent gallons, with one gallon of ethanol generally generating one RIN.

There is also an important upside-risk scenario: if substantially more of the 34 petitions received full waivers than EPA assumes, the ethanol impact could be considerably larger. EPA has estimated roughly 34 qualifying operational small refineries could account for as much as 18 billion gallons of gasoline and diesel annually. At the 8.82% conventional requirement, that theoretical ceiling would be about 1.59 billion gallons of ethanol.

Bottom line: EPA’s working assumption is about 525 million gallons of conventional ethanol at risk from 2025 SREs, with 780 million RINs of total renewable-fuel obligation affected.

For the corn and ethanol complex the variable to watch is not the number of petitions granted but the volume of renewable-fuel obligation waived — and whether EPA reallocates that volume to non-exempt refiners.

Table 5. Pending small refinery exemptions: what Friday could bring. Scenario framing by Ag Policy & Markets Daily; petition counts per trade reporting and EPA’s SRE dashboard. EPA has not confirmed the timing or scope of any announcement.

The two actions also cut in opposite directions politically. The winter-gasoline waiver is a gesture toward motorists that farm-state lawmakers can live with, because it does not reduce ethanol blending. A broad SRE grant is the opposite: it lowers compliance costs for refiners while reducing the effective renewable volume mandate — exactly the trade the corn lobby has fought since 2018.

If both land inside 24 hours, expect the administration to present them as a single affordability package, and expect farm-state reaction to focus almost entirely on the second one.

Political timing matters, too

The administration also has an obvious political incentive to act.

The Nov. 3 midterm elections are less than three months away, and gasoline prices are one of the most visible forms of inflation consumers encounter. Unlike many inflation statistics, motorists see the gasoline price displayed in giant numbers on street corners every day.

The August EIA outlook projects U.S. retail gasoline prices averaging $3.78 per gallon for 2026, up sharply from $3.10 in 2025. It also raised its forecast for the 2026 wholesale gasoline price by nearly 6% from the previous month’s estimate. With the current national average still above $4, the administration has a strong incentive to accelerate the normal autumn decline before voters begin casting ballots.

The official forecast already assumes only modest relief. The first eight months of 2026 have averaged roughly $3.75 a gallon, including a May monthly average of $4.48. Reaching EIA’s $3.78 annual figure therefore requires September through December to come in near $3.85 — about 20 cents below the current national average, but still some 80 cents above the same four months of 2025. Even the government’s own outlook, in other words, is not forecasting a collapse in pump prices; it is forecasting that the Iran risk premium stops widening.

Bottom line

EPA’s early winter-gasoline waiver is more significant than it initially sounds.

Allowing higher-RVP gasoline beginning Sept. 1 permits refiners and blenders to use cheaper, more plentiful components such as butane, effectively stretching the country’s available gasoline supply at a time when refineries have almost no spare operating capacity.

That should pressure gasoline cracks and pump prices lower than they otherwise would be and could prevent localized shortages during the September refinery-maintenance season. Realistically, the size of the prize is a few cents a gallon — not a quarter.

But it cannot repeal the Iran risk premium.

If crude remains near $90 and global refinery capacity remains impaired, the waiver may merely prevent gasoline prices from moving higher rather than produce a dramatic decline.

Watch Friday as closely as Sept. 1. Any broad small refinery exemption decision — especially one built on a looser definition of economic harm — would hit RIN values and implied ethanol demand far harder than an RVP timing change helps motorists.

The real test will therefore come in September: whether the additional winter-blend barrels arrive faster than Middle East disruptions remove barrels from the global market.

AG POLICY & MARKETS DAILY   |   SPECIAL REPORT  |  FUELS, REFINING & THE PUMP — THURSDAY, AUGUST 20, 2026