Why have gas prices in MI gone up so much more than the rest of the country?

SOUTHFIELD, Mich. (WXYZ) — Michigan leads the country in skyrocketing gasoline prices. AAA reports that we saw an increase of about 30 cents in the last week. It is the largest increase in the nation.

Fuel suppliers told 7 Action News that part of the increase is due to the fact that metro Detroit gas stations must switch to more expensive summer fuel this month. The change results in an increase in costs.

The Michigan Petroleum Association says that for gas stations, the average cost is about $4.40 per gallon for regular unleaded fuel. They are selling at some stations at a loss. This could mean that as gas stations average their costs and set prices, their price could rise in the coming days if trends continue.

“I love my car so much, but it’s like, do I love it enough to keep paying these prices?” said Andrew Thomas, a driver from Detroit.

Many drivers are considering cutting back if they haven’t already. While higher gas prices are bad for drivers and local gas stations, there are winners.

“Oil companies are making record profits right now. Because they can,” said Janell Townsend Ph.D., president of the Oakland University School of Entrepreneurial Marketing.

This week, Shell announced a record $9.1 billion in quarterly profit, up from $6.4 billion in the fourth quarter of 2021. BP’s first quarter profit is $6.2 billion, up from $4.1 billion in the previous quarter.

Drivers want to know why oil companies can’t charge less if they’re making so much money.

“I think they should feel some of the pain, put themselves in our shoes for once,” Thomas said.

“Well, there is a supply and demand factor,” said Professor Townsend.

Townsend says it’s a time of year when people drive more. The Energy Information Administration says that here in the US gasoline stocks fell by 2.2 million barrels, while demand increased by 8.74 million.

“The price of oil is a global price. They don’t set the price,” said Zeina Alsalman Ph.D., an economics professor at Oakland University.

Professor Alsalman says US oil companies have doubled production since 2008 and are now profiting. He also says that speculators expect prices to rise and as a result, dealers are now buying above-ground inventories for later, which affects prices now.

“Whenever we say that there is a shortfall in oil production, it is not the main reason for the increase in the price of oil. They are the precautions against a deficit. So when they start buying more as a precaution against a shortfall in oil production, that’s what drives up the price of oil, along with higher global demand,” Professor Alsalman said.

Those precautions may be occurring in response to the European Union’s proposal to ban Russian oil imports within six months.

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