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Michigan, a volatile market for gas prices, sees demand go up

State report finds the rate of consumption of gasoline might be up for the fifth year in a row.

By Daniel J. Graeber
Michigan drivers consuming more gasoline despite volatility at the pump, a state report finds. File photo by /Brian Kersey/UPI
Michigan drivers consuming more gasoline despite volatility at the pump, a state report finds. File photo by /Brian Kersey/UPI | License Photo

May 25 (UPI) -- Drivers in Michigan, one of the most volatile markets for gasoline, are putting slight pressure on demand because of economic conditions, a state report found.

Motor club AAA reports a national average retail price for a gallon of regular unleaded gasoline at $2.37 for Thursday, one day before the start of the long Memorial Day holiday weekend. Demand pressures from the busy travel holiday usually push retail gasoline prices higher and the price at the pump is up about 1.5 percent from one week ago.

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The Great Lakes region is the most volatile market in the country, with weekly price swings greater than other regions on a regular basis because gasoline is produced by a few dominant refiners. Michigan gas prices are up 3.5 percent from last week. That compares with an increase of less than 1 percent for Alabama, which has the lowest state average price in the nation at $2.12 per gallon.

A measure that took effect in Michigan in January raises the tax on motor fuel based on the rate of inflation until it reaches 26.3 cents per gallon in 2022. That makes Michigan one of the more expensive markets for gasoline in the nation.

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A report from the Michigan Agency for Energy finds that, despite the increase in gasoline prices that was triggered by the tax measure, gasoline demand is higher than last year by about 0.2 percent.

"This will be the fifth straight year of gasoline consumption growth if summer demand patterns continue as expected," the agency's report read.

A federal report this week said the number of miles logged by passenger cars and light trucks set a record last year at 2.84 trillion miles, but the gain was because of more vehicles on the road, not because of longer trips. According to the Energy Information Administration, national gasoline consumption for light-duty vehicles is expected to decline more than 13 percent by 2025 to 7.5 million barrels per day.

The Michigan agency said state-wide consumption trends have been higher since 2013 while fuel efficiency has only improved slightly from last year.

"While these efficiency gains appear to be leveling off, relatively low gasoline prices and improved general economic conditions in the state have helped to give gasoline sales a boost," the report read. "Regionally, demand is also expected to increase, albeit only 0.1 percent."

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