Michigan gas prices fall for 10 straight weeks. How long can that last?
- Michigan’s average gas price hit $3.88 per gallon on Wednesday
- The change is 56 cents per gallon less than a month ago, but 70 cents higher than last year
- However, experts say the slow declines could end by Labor Day
Michigan’s average gas price hit $3.88 per gallon on Wednesday, a three-cent decline over the past three days.
The drop underscores a quiet but significant 10-week decline in gas prices since they hit a state record in June, though experts say the steady declines could end by Labor Day and into the fall.
The state set a new price record on June 11, when average prices rose to $5.23 per gallon. The current mark of $3.88 represents a 25-percent reduction.
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But current prices still remain 22 percent above prices from a year ago, when gas went for $3.17 per gallon.
There is no guarantee the summer declines will continue, however.
"While Michigan motorists continue to see some relief at the pump, the decreases appear to be slowing down," said Adrienne Woodland, spokesperson of AAA The Auto Club Group, in a news release.
Further, she said, if demand increases as the Labor Day holiday approaches, “motorists could see prices rise slightly."
GasBuddy, which tracks the petroleum industry for consumers, also notes the price decline is slowing as oil prices bounced up last week.
In a typical year, however, annual prices are lowest in fall and early winter, which the U.S. Energy Information Administration forecasts would likely happen this year, barring additional supply constraints.
Gas price gyrations have been complicated this year: Global supplies were disrupted by the Russian attacks in Ukraine. At the same time, U.S. demand grew while the nation’s production was lower than usual due to lower sales volume and staffing shortages stemming from the pandemic.
Prices are dropping this summer for a similar range of factors, including President Biden’s ordered release of 180 million barrels of oil from the Strategic Petroleum Reserve, which U.S. Treasury analysis late last month said cut anywhere from 17 to 42 cents off the per-gallon pump price.
Other factors include increased global production, oil company pricing strategies as they weigh recession risks and reduced consumer demand, with an estimated two-thirds of U.S. drivers changing their driving habits, according to AAA.
The record-setting spike that peaked in early June also helped to fuel U.S. inflation, which hit a 40-year high amid rising costs for food, gas and most other consumer items.
The recent falling gas prices are cutting the rate of inflation this summer. According to the Bureau of Labor Statistics data for July, the most recent available, food costs continued to rise, but gas prices fell 7.7 percent. The combination kept the annualized inflation rate at 8.5 percent.
But while July’s price drop kept overall inflation in check, the year’s gas prices still are among the biggest drivers of inflation: Over the past 12 months, they’ve increased 44 percent, according to the BLS.
Michigan’s gas station owners are relieved that consumers have more money to spend than a few months ago.
“It bodes well for our customers that our costs went down,” Mark Griffin, president of the Michigan Petroleum Association, which represents most of the 5,000 gas stations in the state, told Bridge Michigan.
“That means they have more money in their pocket, usually, to come inside and spend in our stores. “
Stores associated with gas stations are the moneymakers of the operations, Griffin said, accounting for 70 percent of profits, compared to 30 percent from fuel sales.
While the average price for a gallon of gas in Michigan has decreased, drivers will see more variability than ever in prices among stations across the state.
Average prices in 10 counties, mostly in the central and western edge of the state, have average prices under $3.70 per gallon, while 17 are still averaging over $4 per gallon. Those range from the Upper Peninsula to the Lake Michigan and Lake Huron northern shorelines to metro Detroit.
Even block by block, Michigan drivers may notice bigger price swings than typical.
“There’s been a lot of volatility (on pricing) while the overall cost has come down,” Griffin said.
Day-to-day refueling costs for individual stations may range from eight to 15 cents per gallon, depending on the supplier, “which is unusual,” he said.
So when a station’s tanks run low, refilling could cost more than expected — resulting in that station deciding whether it can pass the cost onto customers or sell it at a loss, hoping to make it up in soda or snack sales.
“If you have to buy it on a day where it went up 15 cents, it’s really difficult when you’re competing against a neighboring station that bought it the day before when it was 15 cents cheaper,” Griffin said.
Like AAA, Griffin says the price drops may not continue after Labor Day weekend, since the market still faces many uncertainties, ranging from whether supplies will once again change due to the Russian-Ukrainian war this fall and winter to whether the fall hurricane season disrupts U.S. refineries, as it did when Hurricane Harvey struck Texas in 2017.
In the U.S., though, “it seems like we’ve got a better handle on the supply issues that were causing some of our domestic cost increases,” Griffin said. “And we hope that continues.”
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