SOUTHFIELD, Mich. (WXYZ) — Michigan is leading the nation when it comes to skyrocketing gas prices. AAA reports that we saw an approximately 30 cent increase in the last week. It is the largest increase in the nation.
Fuel providers tell 7 Action News part of the increase is due to the fact that this month metro-Detroit gas stations need to switch over to more expensive summer fuel. The change over results in an increase in costs.
The Michigan Petroleum Association says for gas stations, the average cost is about $4.40 a gallon for regular unleaded. They are selling at some stations at a loss. This could mean that as gas stations average out their costs and set prices, your price could increase in the coming days if trends continue.
“I love my car so much, but it is 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 the higher gas prices are bad for drivers and local gas stations, there are winners.
“The oil companies are making record profits right now. Because they can,” said Janell Townsend Ph.D., Oakland University School of Business Marketing Chair.
This week Shell announced a record $9.1 billion in quarterly earnings, an increase from $6.4 billion in the fourth quarter of 2021. BP’s first-quarter earnings are $6.2 billion, up from the $4.1 billion the previous quarter.
Drivers want to know why oil companies can’t charge less if they are making so much money.
“I think they should feel some of the pain, put themselves in our shoes for once,” said Thomas.
“Well there is a supply and demand factor,” said Professor Townsend.
Townsend says we are at a time of year when people drive more. The Energy Information Administration says here in the U.S. gasoline stocks decreased by 2.2 million barrels while demand increased by 8.74 million.
“The price of oil is a global price. They do not set the price,” said Zeina Alsalman Ph.D., an Oakland University Economics Professor.
Professor Alsalman says U.S. oil companies have doubled production since 2008 and now are benefiting. She also says speculators are expecting prices to go up and as a result agents are right now buying above-ground inventories for later, impacting prices now.
“Whenever we say there is a shortfall in oil production, it is not the main reason for the increase in oil price. It is the precautions against a shortfall. So when they start buying more as a precaution against a shortfall in oil production, that is what increases the price of oil, along with more global demand,” said Professor Alsalman.
Those precautions may be happening in response to the European Union’s proposal to ban Russian oil imports within six months.