$4 gas in MI makes Governor's increased gas tax plan tough sell

Story first appeared on Detroit Free Press -

Average gasoline prices in Michigan were pushing rapidly toward $4 per gallon Monday, a psychological benchmark that irked motorists and likely made passage of a gas tax proposal from Gov. Rick Snyder even more difficult.

The rising gas prices -- a product of numerous regional, national and global factors -- come amid Snyder's call in his State of the State address Feb. 7 for state lawmakers to increase Michigan's wholesale gas tax by 14 cents a gallon and its diesel tax by 19 cents to pay for road repair and maintenance.

The tax and fee increases would raise $1.2 billion annually.

Republican leaders, including Secretary of State Ruth Johnson and Senate Majority Leader Randy Richardville, joined a chorus last week criticizing the proposal.

A spokesman for the governor, Kurt Weiss, said Monday, "We know we have some work to do on that legislation, and we are willing to roll up our sleeves and come up with a solution for fixing our roads."

Michigan ranks sixth among the 50 states for the highest taxes on gasoline, according to a January survey by the American Petroleum Institute.

Michigan's average price per gallon for regular last breached $4 over the summer.

Gas was selling Monday for $3.95 a gallon -- cash or credit -- at the Mobil station on Woodward in Midtown Detroit.

Em Jacoby, 27, of Detroit was shocked by the final price reading on her pump.

"I just spent 50 bucks and I thought I was going to spend $30," she said. "And I didn't even fill it up all the way."

Sarita Scott, 42, also of Detroit, was happy she no longer drives an SUV.

"It went up very fast and unfortunately it's already tough times for people," she said, "and this doesn't help."

A Pontiac Vibe driver at the Midtown Mobil said higher gas prices are actually a good thing because they push people to buy fuel-efficient vehicles. The Vibe model gets about 30 m.p.g. combined city and highway.

"I think (gas) should be taxed higher," said Cory Cookingham, 21, of Flint, who added, "But I don't drive that much."

The average statewide cash price for a gallon of regular unleaded was $3.91 a gallon, an increase of 16 cents from a week ago, according to AAA Michigan's Daily Fuel Gauge report. The average was 60 cents higher than in mid-January, when prices began this latest ascent. In metro Detroit, pump prices were averaging $3.88 a gallon on Monday. Pricier gas was found in Ann Arbor, Grand Rapids and Jackson, according to the auto club's survey.

The national average on Monday was $3.73 a gallon for regular unleaded, according to AAA. Prices were highest in Hawaii followed by California, where news reports told of a $5-plus-per-gallon price in southern California.

Mark Griffin, president of the Michigan Petroleum Association, attributed much of the recent price increases to financial speculation in the oil commodities market. He said the association's retail outlet members have little economic choice but to pass along the price increases that are hitting them to consumers.

"Historically, we do see this type of an increase, but it's usually a little later in the March time frame," Griffin said Monday. "This year it seems to be a couple of weeks early. And what drives most of it is speculation; the oil markets start speculating that the demand is going to come and that drives it up."

The price of a barrel of West Texas Intermediate crude oil for March delivery was just under $95.60 on Monday, according to Bloomberg News.

Patrick DeHaan, a petroleum analyst for GasBuddy.com, said several recent minor issues at Great Lakes region oil refineries could also be having an effect on Michigan gas prices. He also pointed to recent data compiled by the U.S. agency that monitors commodity markets that show speculators placing more long-term bets that oil prices will rise.

"When you see a lot of contracts shift from short to long, it can bring even more traders to do the same thing, and it can have an impact on the price of crude oil," DeHaan said.

Oil and gas analyst Stephen Schork also attributed much of the recent price spike to refinery problems as well as a scheduled refinery maintenance season. The U.S. has long had issues with tight refinery capacity.

"The longer, harder you run a machine, chances are that machine is going to break down," Schork said. "Is there some degree of speculation? Absolutely. Because there always is. But you can't blame these high gasoline prices on speculation."