Friday, September 2, 2011

Labor Day and hurricanes to blame as gas prices rise sharply in Michigan

The past two weeks had some good news from the Detroit Free Press.

First, two weeks ago. AAA Michigan: Gas prices down 5 cents in past week
AAA Michigan says gasoline prices are down 5 cents per gallon over the past week to a statewide average of $3.69.
Now, this week. AAA Mich.: Gas prices down 3 cents in past week
AAA Michigan says gasoline prices are down 3 cents per gallon over the past week to a statewide average of $3.66.

The auto club says today the average is about 96 cents per gallon higher than last year at this time.
This week saw two weeks of falling prices and then some reversed. Bloomberg Business Week reports AAA Mich.: Gas prices up 11 cents in past week.
AAA Michigan says gasoline prices are up 11 cents per gallon over the past week to a statewide average of $3.77.

The auto club says Monday the average is $1.06 per gallon higher than last year at this time.
Gas prices have continued to rise this week. WXYZ has the story.

Gas prices are heading up as we head into the Labor Day weekend.

Ms. Lewis correctly identified two parts of the story, the usual increase in prices because of Labor Day demand in the short term and increased demand overseas while domestic demand is declining in the long term, but she neglected one other factor driving up gas prices--hurricanes. WHMI blames Hurricane Irene.
AAA’s Nancy Cain tells WHMI that unfortunately, the gas price story was a little bit better before Hurricane Irene came through. Cain says a number of refineries along the east coast shut down in advance of the hurricane, which caused a lot of concern over supply so prices have gone up and it's unclear when they’ll go back down.
Irene isn't the only storm causing problems with domestic oil and gas supply. Tropical Storm Lee is also reducing supply, as Bloomberg Business Week reports.
The tropical depression in the Gulf of Mexico was about 240 miles (385 kilometers) southwest of the Mississippi River mouth, moving northwest at about 2 miles per hour with maximum winds of 35 mph, the Miami-based NHC said in an advisory issued before 5 a.m. East Coast time. The system may become a tropical storm today before reaching Louisiana this weekend.

About 5.7 percent of Gulf oil production and 2.4 percent of natural gas output has been shut, according to the Bureau of Ocean Energy Management, Regulation and Enforcement. The Gulf accounts for 27 percent of U.S. oil output and 6.5 percent of natural gas production.
The paradoxical part of this event is that, even though gasoline prices are rising, oil prices are dropping.
Oil dropped in New York, trimming a second weekly gain, as the U.S. failed to add jobs last month, spurring bets that fuel consumption in the world’s largest economy will suffer.

Futures extended losses after Labor Department data showed employment in the U.S. unexpectedly stagnated in August and the jobless rate held at 9.1 percent...

“The data is negative enough to believe there will be a very slow recovery, and demand for oil is already weak,” said Eugen Weinberg, Frankfurt-based head of commodities research at Commerzbank AG, who forecasts Brent will average $100 a barrel in the fourth quarter. “But it’s not a complete disaster. I don’t think it’s enough to make the Federal Reserve move.”

Oil for October delivery fell as much as $2.65 a barrel, or 3 percent, to $86.28 a barrel in electronic trading on the New York Mercantile Exchange and was at $86.41 at 1:34 p.m. London time. The contract yesterday gained 12 cents to $88.93, the highest close since Aug. 3. Prices are up 1.2 percent this week and have gained 17 percent in the past year.

Brent oil for October settlement was at $112.01, down $2.28, on the London-based ICE Futures Europe exchange. The European benchmark was at a premium of $25.68 to U.S. futures, up from $25.58 at yesterday’s settlement and compared with a record close of $26.21 on Aug. 19.
We've seen this before. The result was that gas prices began falling shortly afterwards. Look for gasoline prices to start dropping next week, after both the holiday and Tropical Storm Lee pass. In the meantime, Michigan has the seventh highest gas prices of any state in the country, according to AAA as reported in West Bloomfield Patch.
According to the AAA’s Fuel Gauge Report, the average gas price in Michigan is $3.83/gallon for regular gasoline. The average in the Mitten State this time last month was $3.78/gallon and the average last year was $2.70/gallon for regular gas.

Michigan's regular gasoline prices are surpassed by Alaska ($3.91/gallon), California ($3.88/gallon), Connecticut ($3.93/gallon), Hawaii ($4.11/gallon), Illinois and New York ($3.87/gallon), and Washington ($3.84/gallon).

The national average for regular gas is $3.64/gallon, which is about a dollar more than drivers were paying at the same time in 2010. The national average for regular gas at this time last month was $3.70/gallon.
Happy driving!

1 comment:

  1. IEA released 60 million barrels of oil. Naturally the price dipped.

    For a more elaborate version of this explanation see:

    SPR Release: Stocks and Commodities

    SPR Release: Stocks and Commodities (Part 2)

    SPR Release: Stocks and Commodities (Part 3)

    There are three blog entries because I wrote it as the news was arriving.