Experts uncover Michigan’s gas sources and rising pump prices

No matter where Michiganders go, they’re paying more to fill up their tanks, but experts say there’s a lot that goes into those rising prices. According to AAA, Michigan’s gas price average hit $4.01 on Tuesday, which is about $1.10 higher than a month ago. This increase has sparked concern among drivers and businesses alike.

The prices echo what’s being paid for crude oil, which sits just below $100 a barrel. That’s being driven by the war in Iran and the closure of the Strait of Hormuz, a key transit point for the world’s oil. However, what Michigan drivers are putting in their car isn’t directly impacted by that, at least not when it comes to the transportation of the oil used in domestic gasoline.

“You have some oil coming from Canada, you have oil coming from literally out in the middle of the Gulf of America, as we call it today, coming up from Texas, it comes on pipelines from out west, from the Dakotas,” said Mark Griffin, President of the Michigan Petroleum Association. “That same thing happens to us with crude oil.”

Griffin, who also represents convenience store owners, explains that the U.S. is a net exporter of oil, meaning it produces more than it uses. Despite this large domestic supply, high prices are the result of basic economics. He compares it to buying a share of stock from a company today at a hundred bucks and finding out tomorrow that they’re the only source for a widget that everyone has to have, causing the stock to rise to $200.

“The company did nothing unique on that day, but their stock went up and now it’s worth more. That same thing happens to us with crude oil,” he said.

Griffin adds that gas stations have limited options to manage these costs. “The typical gas station, about 70% of their gross sales is motor fuel, but it’s only 30% of their profit,” he explained. “Retailers have to adjust their prices first to be able to pay for replacement costs. If you’re buying 10,000 gallons at a time and the price goes up 50, 70 cents a gallon, like we’ve seen, you have to raise your prices now to be able to afford that next load or you’ll go out of business.”

Other pressures facing fuel include the annual switch to the summer blend of gas that can temporarily lower supply and boost prices. Michigan’s gas tax structure also changed this year, leading to a price increase, according to Griffin.

To stay competitive, many gas stations do try to sell below cost, hoping to ease the burden and bring customers in. “Our in-store sales go down because people literally just don’t have the money in their pocket to spend inside the store,” he said. “That’s one reason why we would much rather see these costs go down.”

So, there’s not much drivers can do to escape the high prices, but AAA has tips. “Now is a really good time for drivers to consider shopping around,” said Adrienne Woodland, spokesperson for AAA Michigan. “They may want consider paying cash for gasoline. Some retailers charge more if you use a credit card. Now is also a great time for drivers to enroll in fuel reward savings programs.”

Otherwise, both Griffin and Woodland believe gas prices will remain volatile alongside oil prices, so it’s not clear whether they will come down any time soon.