Wednesday, April 10, 2013

Lower gas prices in Michigan plus bonus gas price rollercoaster

Sunday, the Detroit Free Press republished the good news reported orginally by USA Today: Michigan ranks among top states where gas prices are plunging.
March gasoline prices fell for the first time in 10 years.

As of Apr. 1, the price of gas had fallen in 29 of the previous 33 days. Nationally, gas costs 30 cents a gallon less than it did a year ago and 15 cents a gallon less than it did following the February run-up in prices. AAA predicts the average price of gas in 2013 will be lower than 2012's average of $3.60 a gallon — the highest AAA has ever recorded.

There are some significant reasons for the price drop. First, Americans are driving less — about 2.7% less, according to Department of Transportation figures, or nearly 90 billion miles since reaching a peak of more than 3 trillion miles in November 2007. Second, older, less-fuel efficient cars are being replaced by new ones that get better gas mileage. Third, refineries are finishing up their spring maintenance and turnarounds a bit earlier this year, so production is ramping back up sooner.

However, the main reason that gas is cheaper now than it was a month ago is that crude oil prices have dropped.
This year we have also seen an increase in North American crude, whether it's out of the Bakken or Eagle Ford, or out of Canada, and that's certainly helped with oil prices in the United States.
Illinois is a major hub for Canadian crude oil, and the state's refineries have access to crude that is currently $15 a barrel cheaper than WTI and nearly $30 a barrel cheaper than Brent.
It is very possible — some might even say very likely — that the highest pump prices for gasoline are behind us for this year. Most analysts do not see prices rising to February levels again this year, barring some shock to the system, such as major political turmoil in big oil producing regions like the Middle East or Africa, major shutdowns due to bad weather or some major accident. That is the good news. The better news is, there really is no bad news.
That's the national picture.   How does it look here in Michigan?
1-yr. change in gas prices: -9.1%

Gas price, 4/1/2013: $3.68 (15th highest)
Over the past 12 months, the price of gas in Michigan has fallen from an average of $4.05 per gallon to $3.68. Additionally, while Michigan prices are still higher than the nationwide average, the gap has shrunk from 13 cents to just five cents. But this may not last for long: Governor Rick Snyder has called for a major gas tax hike as part of an initiative to raise roughly $1.2 billion to fix and improve the state's roads. According to the American Petroleum Institute, as of January, Michigan already had one of the nation's highest effective tax rates on gas, at 38.7 cents per gallon.
The good news continued on Monday as the Associated Press reported that Michigan gas prices fall 4 cents from last week with a statewide average of $3.65/gallon.  As for how that played out locally, prices dropped exactly 4 cents from last week's installment of the gas price rollercoaster from $3.59 last Thursday to $3.55 at all four local stations Tuesday morning.  As I wrote before, "[t]hat's good news, although I still expect the price to go up between now and July 4th in small steps."  Just the same, maybe New Deal Democrat at The Bonddad Blog is right and the oil choke collar is finally loosening.


  1. just when things are getting better Governor Rick Snyder has to jump in and ruin everything!

    1. If it weren't for the need to fix the roads, I'd agree with you. As it is, I don't think he's going to get his wish this year. There aren't enough legislators to pass any one way of raising revenue. Low taxes are more important than maintaining infrastructure to a majority. Fools.