As you may already know, prices spiked up over the weekend. It’s $3.899 in Ohio, $3.999 in Indiana, and $4.159 In Michigan. I’ll get to the reason for that disparity later, but first, to the reason why we spiked up in the first place.
We have seen an enormous rise in spot prices recently, up almost 35 cents in the last week, and 80 cents since mid-April. The big reason for this is refinery issues that have plagued the mid-west, as well as some pipeline issues. Part of BP’s Whiting refinery is due for reopening this month, as is Exxon’s Joliet refinery. This actually helped lower June’s first cycle prices at the beginning of the week, but a round of refiner buying is driving the latest price increase. The EIA supply reports are showing we are low on supply. Rack prices out of Chicago are also rising (I don’t have rack prices closer to Indiana, Michigan, and Ohio, unfortunately.)
That being said, we have not seen a corresponding rise in prices at the pump. At least, we aren’t as high as we should be with the current spot price. Indiana has an average of $3.98, and it still is 27 cents lower than the Spike Line. Michigan’s average is $4.15, yet they are 15 cents lower than the Spike Line. Ohio is up to $3.85, yet they are almost 16 cents below the Spike Line. Prices have been lower than the Spike Line for quite a while now. The only reason I have is that some areas are being supplied from outside the region.
That leads me to the reason for the price disparity we are seeing. Ohio is always lower, as they have a lower tax on gasoline. Indiana and Ohio may also be lower than Michigan because they are being supplied in part from the Gulf Coast. They have a spot price almost 70 cents lower than in Chicago. I believe Michigan is not getting supplied by the Gulf coast due to it’s proximity, that is reason enough for the higher price.
So, how long will this last? It is hard to say. With almost 500,000 barrels per day of refinery output allegedly coming back online, relief should be on the way. But that output will take around two weeks to come online. We shall see in the coming week how things work out, and I will keep you posted on what I find.