Saturday, September 21, 2013

Gas prices in Michigan bouncing off a bottom

I have been loath to break out Professor Farnsworth this year for low gas prices and what's transpired since I posted Good news on gas prices from Professor Farnsworth supports my usual reluctance.  The next day, the corner station raised its price to $3.65.  The three stations down the block held at $3.45.  Yesterday morning, the corner station undercut their price, selling regular at $3.44.  That's lower than before the Syria fear premium took effect.  Yesterday afternoon, the price went up again, this time to $3.59.  I didn't see what the three stations down the block were charging for gas, but I suspect they went up, too.  Why?  Econobrowser has an answer.

It turns out that prices all over metro Detroit and Michigan have risen in the past few days.  The day I posted Professor Farnsworth, the average prices in the state and metro area bottomed out at $3.46 and $3.48, respectively.  Prices in both areas immediately shot up, peaking in Michigan yesterday at $3.59.  In Detroit, they're currently plateauing at $3.53.  In that kind of environment, I expect all the neighborhood stations will follow suit, not just the corner station.

As for what's causing this, it's something happening in the region, but not nationally.  Average gas prices have also gone up this week in Indiana and Ohio, but not in Illinois or Wisconsin.  In fact, the latter two states are following the national trend of steadily decreasing gas prices with the current national average declining to $3.50 from Wednesday's $3.51 to $3.52.  The national prices are following the generally declining price of Brent Crude, which closed yesterday at $109.22.  That's more than three dollars below last Monday's $112.32.  The Syria fear premium is like Francisco Franco, still dead.  So, I know what it's not.  As for what it is, I suspect it's a refinery issue or other regional shortage, but I've found no coverage of it in the local media so far.  If I find out, I'll post the news.

ETA: I found a story in the Grand Haven Tribune that confirms my hypothesis.
There are several reasons for the uptick, according to Gas Buddy and AAA analysts. Among them, particularly for our region, are two Midwest refineries undergoing upgrades so they can refine sandy crude oil from Canada.

In Detroit, the Marathon Co. has shut down for more than two months to connect its newer multi-billion-dollar refinery equipment to its older facility. BP is also working to expand its refinery in Indiana, which will also require a brief shutdown later in the year.

The annual switch-over to the winter gasoline blends also creates a short-term problem with partial refinery shutdowns as the change is made.
I was right--refinery issues in the Michigan-Indiana-Ohio area.

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