Gasoline prices have risen dramatically in Michigan and across our country within the past 24 hours as the result of an unfortunate combination of events. All indications are that gas prices will continue to rise over the next several days.
In recent years, gasoline prices have reached their annual peak at Labor Day weekend. Crude petroleum reached a record high price yesterday of nearly $71 a barrel. Hurricane Katrina has resulted in the loss of 10% of the nation's refining capability and 25% of its crude oil output. Nine refineries have been closed and four more are running at reduced levels. The nation is facing an immediate energy crisis.
While Michigan is blessed in not facing the direct devastation of Hurricane Katrina, the indirect effects of the hurricane on the state's economy could be severe. Marathon-Ashland Petroleum, which supplies much of Michigan's gasoline, has lost its largest refinery as a result of the hurricane and several others are dependent on crude oil from the Gulf of Mexico that is not being pumped at this time. As a result, Marathon has suspended shipments of gasoline to independent suppliers in Michigan and raised the wholesale price of gasoline state-wide. Last night, Michigan gasoline prices increased to an average of $2.99. Within the past two hours, many stations in southern Michigan have increased their prices to $3.19. Some stations have increased their prices above $3.50 and a number of independent stations have closed.
The federal government has responded by releasing crude petroleum from the federal petroleum reserves sending crude oil prices below $70 a barrel this morning. However the effect of this gesture has been limited since the shortage is primarily caused by the limited supply of refined gasoline, not crude petroleum. Governor Granholm is allowing some counties in lower Michigan to sell regular gas instead of more fuel-efficient summer grade gasoline in order to boost the short-term statewide gasoline supply. There are reports that President Bush may call for national energy conservation measures as early as tonight.
While the gasoline shortage is not as dire as some people believe and there is no need for a run on gasoline, the price increases will have a harmful effect on northern Michigan's economy, particularly a likely decrease in Labor Day tourism to the region this weekend. The Michigan Legislature is meeting today to discuss short-term remedies such as a suspension of the state sales tax on gasoline and legislation to cap the wholesale price of gas similar to what the State of Hawaii did last week. However, both of these measures come with significant costs.
I have been working with four other legislators on a "Fuels of the Future" package that will be introduced this afternoon. While the legislation will not provide short-term relief, it would greatly lessen our dependence on foreign oil and help to prevent future fuel shortages.
If you wish to help with the disaster in Louisiana, Alabama, Mississippi, and Florida, I encourage you to contact Network for Good (www.networkforgood.org), a collaborative effort of various charities and relief organizations including the American Red Cross. As always, please feel free to e-mail me with any questions you may have on issues facing northern Michigan.