Michigan drivers are feeling less pain at the pump.
AAA and Gas Buddy say the statewide average price for a gallon of regular unleaded gas is less than $4 per gallon as of July 7. The last time it was that low was in April, a few weeks after the United States attacked Iran in March.
Iran responded by closing the Strait of Hormuz to oil traffic. That sent gas prices up to almost $5 per gallon in May. At the same time, the average cost of diesel fuel rose to $6.20 per gallon, a new record for Michigan.
When did prices begin falling?
Tensions in the Persian Gulf have eased since the U.S. and Iran signed a memorandum of understanding in June, aiming toward ending the war.
Iran is now allowing more tankers through the Strait of Hormuz.
Gas Buddy senior petroleum analyst Patrick DeHaan says oil prices have fallen to their lowest level since the war began.
“OPEC+ has increased production, another piece of good news,” he says. “Prices are back below $70 per barrel.”
Oil prices are low, gas not so much
But the drop in oil prices hasn’t affected fuel prices as much as it could have. DeHaan says that’s because of Ukrainian attacks on Russian oil refineries.
“You can have all the oil in the world,” he says. “But if there aren’t refineries to turn that into gasoline, diesel, and jet fuel, you could have very low oil prices but very high fuel prices.”
DeHaan says prices could go up 10 to 20 cents per gallon by mid-July due to less refining capacity at home, too.
A power outage at the Marathon Petroleum refinery in southwest Detroit on July 5 temporarily halted operations there. It also forced the company to burn off excess gases to keep them from building up. Marathon says power was restored on July 6 and it’s working to resume normal operations.
DeHaan says even a short delay could affect prices.
“Many times, brief disruptions can lead to multiple days of down time,” he says. “We don’t have a full picture on exactly how long that refinery could be impacted.”
Domestic supply dwindles
A lack of refining capacity could mean the U.S. dips into its strategic oil reserve to address any shortages or price increases.
DeHaan says that reserve is getting low.
“It’s now at its lowest level since 1983, with about 326 million barrels,” he says. “Having less oil available strategically could be problematic down the road.”
DeHaan says while gas prices are trending down, several factors could send them back up, such as a hurricane in the Atlantic Ocean.
“We’re weeks away from entering the peak of hurricane season.” he says. “And with continued Ukrainian attacks on Russian refineries, that could be a problem.”
