Michigan gas prices dropped to $4.72 a gallon, but petroleum analysts warn that another surge may be coming as hope quickly faded this weekend for the United States and Iran to reach a peace deal.
“That optimism has since largely unraveled,” Patrick De Haan, head of petroleum analysis at GasBuddy, said on Monday, May 11. “As a result, many states could see another round of price cycling in the days ahead.”
How much fuel prices could go up depends on several factors, mostly the price of oil, but also demand for it — which is likely to increase as the summer travel starts — and seasonal blends, and the output of regional refineries.
Rising fuel prices, however, are affecting households differently, largely depending on income, both in spending habits and attitudes toward them.
“Gas prices in Michigan have dropped 14 cents compared to last week, giving drivers some relief,” Adrienne Woodland, a spokeswoman for AAA, said Monday. “But with ongoing volatility, prices could change direction again just as quickly.”
Where gas prices stand across Michigan
Throughout the state, the most expensive gas price averages on Sunday were in Ann Arbor, $4.79 a gallon; metro Detroit, $4.77; and Benton Harbor, $4.76. The least were in Marquette, $4.50; Flint, $4.57; and Lansing, $4.67.
A week ago, the average price of regular gas in Michigan was $4.85 a gallon, with some stations charging more than $5 a gallon, edging close to the state’s record of $5.22 a gallon set in 2022, a result of surging demand after the pandemic and Russia’s invasion of Ukraine.
Summer travel season to soon start
On top of rising oil prices, elevated demand for gas starting Memorial Day Weekend is expected to pick up soon, which could also raise prices, especially if more decide to drive to their vacation destinations instead of flying.
AAA is predicting that 45 million Americans will take trips during the Memorial Day holiday, which signals the traditional start of summer travel. Of those, 1.3 million will be Michiganders, with nearly 1.2 million going by car.
A full, 15-gallon tank of gas costs more than $70.
Nationally, the average was less, $4.52 a gallon, nearly $1.40 more than a year ago.
De Haan, with GasBuddy, pointed out that over the last week, gas prices fell in a half-dozen states, lowering the national average of about $4.50 a gallon. Prices particularly fell in Michigan, Ohio and other Great Lakes states.
Midwest refineries had been offline, adding to the increased cost of gas.
Some are willing to pay more
Since U.S. air strikes on Iran, some Michiganders have expressed deep concern for higher prices, while others told the Free Press they are more willing to accept prices will go up and down, and now — as America finds itself at war — is part of the price of security.
“They are high,” Paul Bateman of Royal Oak said of gas prices as he guided school children across the street near a Citgo gas station on Woodward near 12 Mile Road in Royal Oak. “But to me, it’s my contribution to the war effort. I’m not happy about it, but we’re in a serious war, and it’s going to cost us money.”
Sunday, Donald Trump blasted Iran’s latest proposal on Truth Social as “TOTALLY UNACCEPTABLE!”
Trump did not detail specifically what about it he found objectionable, but his short post dashed hopes and elevated oil trading with the price rising again, to about $100 a barrel, which translates into elevated gasoline, diesel and jet fuel prices.
Higher gas prices for drivers are only part of the economic costs, which do not include the cost of shipping goods and what Michiganders may pay in potential inflation. It also comes on top of the cost of war, $25 billion to $50 billion, according to Pentagon estimates.
Earlier this month, low-cost Spirit Airlines blamed high fuel costs for ceasing operations, leaving an estimated 17,000 workers, including flight attendants, pilots, and ramp workers, out of jobs.
It was the second-largest carrier at Detroit Metropolitan Airport.
Dangers of a K-shaped economy
Whether Americans will tolerate higher fuel costs is unclear.
The Federal Reserve Bank of New York said last week that high gas prices are increasingly putting pressure on lower-income households, which are devoting more of their paychecks to getting around town, and on the economy.
The New York Fed report termed this phenomenon a “K-shaped” pattern, in which higher-income households “kept real consumption essentially unchanged” but low-income households both decreased gas usage and “still saw sharply increased nominal spending” as a result of higher gas prices.
Proportionally, lower-income households spend more on gas, the report said. Surging gasoline prices are pushing up inflation, which hints there could be more trouble ahead.
And while the report found that what’s happening with the steep rise in gas prices now is somewhat of a rerun to what happened in 2022, it also warned that the gap in consumption trends faced by income levels is “quantitatively larger.”
Temporarily lifting regulations, taxes
Some states have taken steps to try to reduce the cost of gasoline by temporarily easing environmental regulations. Michigan Gov. Gretchen Whitmer is allowing winter blends to be sold in the summer months to lower prices by 10 to 20 cents per gallon.
Indiana experienced even steeper gas price declines than other states this week because the state has temporarily waived both its state excise and use taxes on gasoline. Georgia and Utah have cut taxes, and other states are considering it.
Chris Wright, the U.S. energy secretary, has floated a similar plan on the federal level.
Wright said on NBC’s “Meet the Press” on Sunday that the administration is open to pausing the federal gas tax. That could provide some — but not much, about 18 cents a gallon for gasoline and about 24 cents a gallon for diesel — relief at the pump.
The measure, however, could affect the Highway Trust Fund, which the tax goes to and pays for road repairs and construction. It means that, in effect, taxpayers would be paying for it later.
It’s not the first time that suspending the tax has been raised.
Trump mentioned it in March.
And in mid-March, two U.S. senators — both Democrats — proposed the Gas Prices Relief Act, calling for the federal gas tax to be stopped until Oct. 1. Their legislation also called for a transfer of funds to the Highway Trust Fund.
Contact Frank Witsil: 313-222-5022 or fwitsil@freepress.com
This article originally appeared on Detroit Free Press: Michigan gas prices fall briefly as analysts warn of summer surge
Reporting by Frank Witsil, Detroit Free Press / Detroit Free Press
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