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Michigan gas prices fall to lowest in four years, and could drop further

Rod Beard
The Detroit News

Commerce Township — In a typical early spring, gas prices in Michigan would be inching up, as commuters would look to venture out as the weather warms up.

This spring is anything but typical.

In the midst of the COVID-19 spread, Gov. Gretchen Whitmer’s three-week “Stay Home, Stay Safe” order that began Tuesday has restricted commuting. For most people, that means only trips that are deemed “critical,” such as picking up groceries or medication, are allowed. Workers whose jobs are deemed critical to the infrastructure also are exempt.

The White House finalized its plan to roll back stringent gas-mileage rules enacted by the Obama administration on Tuesday.

That’s left most highways and local streets nearly empty of commuters. 

With lower demand for gas come lower gas prices. The average price for a gallon of regular unleaded gas in Michigan dropped to $1.82 per gallon on Tuesday, the lowest in the state since 2016, according to AAA.

Michigan’s average price ranks seventh-lowest in the country, with Oklahoma leading the way at $1.69 per gallon. The national average is $2.10.

At a Wow! gas station in Commerce Township, at Union Lake and Cooley Lake Roads, the price was a whopping $1.23 per gallon. 

At a nearby Kroger, on Union Lake and Commerce Roads, the price was $1.33, which attracted an uptick in business.

"It's a lot — more than normal. They all are loving (the lower prices)," said Gina Groulx, an attendant at the Kroger gas station. "Traffic at the store is unbelievable too."

The lower prices are a ripple effect from the worldwide COVID-19 worries, which have affected the petroleum markets and dropped crude oil prices to $22 per barrel, the lowest since 2002. The price of crude oil, along with taxes imposed by the state, are the biggest factors on prices at the pump.

“It’s (crude oil price) and overall consumption is significantly down,” said Dave Leaver, general manager of the Marathon Petroleum’s Michigan Refining Division. “It’s the stay-at-home orders and people aren’t moving, so demand is down and that lowers prices. Low crude prices and lower demand are driving the cost down.”

According to AAA, the average cost per gallon in Metro Detroit has dropped 21 cents from last week and 64 cents from last month; at this time last year, the cost was $2.68, a change of 86 cents per gallon.

“Typically, gas prices start to trend more expensive at the beginning of spring, especially as motorists get out to enjoy the warmer weather and travel for spring break. That is not the case this year,” said Jeanette Casselano, a national AAA spokesperson. “With Americans urged to stay at home and practice social distancing to slow the spread of coronavirus, we are seeing less traffic on the roadways, which will ultimately drive down demand, increase gasoline supply and push pump prices less expensive for the foreseeable future.”

Retail gas stations make more of their profit from in-store sales than gas, so lowering prices is one way to help increase traffic inside to sell coffee and snacks, among other items. 

It's a delicate balance for retailers, with setting their price of gas and the risk of losing money. For example, within the price of $1.50 per gallon of gas, more than one-third of that could be federal and state taxes and other costs, which limits the profit. They can make that up on other in-store products.

"Retailers are down 25 to 30 percent and that decline is certainly accelerating with the governor's orders," said Mark Griffin, president of the Michigan Petroleum Association and Michigan Association of Convenience Stores. "If you had told me at the first of the year that this drop was going to happen, I wouldn't have believed it."

There’s no clear indication of how low gas prices could go, but competition between Saudi Arabia and Russia amid the COVID-19 spread also has contributed to falling prices of petroleum around the world.

That competition over price and crude oil production also has been a factor in the overall drop in the stock market

“The price of crude is dropping rapidly in the (futures market) and that market is uncertain. We’re going to see how long (it lasts), before too long,” said Peter Langley, executive director of the Associated Petroleum Industries of Michigan.

“I don’t know how much lower it’s going to go, but we’ll probably see something drastic in the next couple of weeks.”

FALLING PRICES

Michigan’s average gas price is $1.82 per gallon on Tuesday, which ranked seventh-lowest in the country. Here’s how Michigan’s price compares to other states   

LOWEST PRICES

1.      Oklahoma: $1.69

2.      Ohio: $1.76

3.      Wisconsin: $1.78

4.      Kentucky: $1.80

5.      Indiana: $1.81

HIGHEST PRICES

1.      Hawaii: $3.44

2.      California: $3.17

3.      Washington: $2.87

4.      Oregon: $2.80

5.      Nevada: $2.73

Source: AAA

Rod.Beard@detroitnews.com

Twitter: @detnewsRodBeard