GRAND RAPIDS, Mich. – GasBuddy published annual gas predictions that slate 2016 as fourth straight year of paying less at the pumps. In 2016 drivers are expected to pay $17 billion less compared to last year, with a lower national average of $2.28 per gallon.
Good news for Michigan: GasBuddy Head Petroleum Analyst Patrick DeHaan predicted gas prices will not exceed $3 per gallon this year.
This is classic supply and demand: with an abundant amount of crude oil between the U.S. and OPEC, and with OPEC’s overproduction, gas prices are driven down.
“[The U.S. has] gone from oil production of five million barrels a day just seven years ago, [and] we’ve nearly doubled it; now we’re producing over nine million barrels a day and the Saudis are certainly very concerned that the U.S. is not purchasing as much oil from the Middle East as they once would,” DeHaan explained.
“The Saudis appear to be playing a game of lowering the price of oil in order to win back market share that was lost to the U.S.”
While this is a sustained sigh of relief for our wallets, DeHaan said keep in mind these lower gas prices are a “double-edged sword” for the oil market in the long run, when oil producers will greatly scale back production.
“That’s the danger here, is that I love these low gas prices, but I’m worried in the backdrop of them, oil producers are unhappy and they’re starting to slow-down production, which would then contribute to an era of again higher prices,” said DeHaan.
Grand Valley State University Associate Dean of the Seidman College of Business Paul Isely told FOX 17, “In the long run we’re looking at a year, two years, three years, of relatively tame gas prices.” In this case, Isely believes the overall economic positives outweigh the negatives, especially for Michigan.
“For Michigan it’s all good news: we’ll have lower gasoline prices, we’ll have less volatility in that gasoline this year, unless there’s major refinery problems and there could be,” said Isely.
There will be hot spot throughout the year with possible price spikes in the spring, especially if the Great Lakes states have any refinery issues.
These predictions are also good news for truckers: DeHaan predicted 2016 to be the first year in the last decade that diesel prices will average out cheaper than regular gas, in part because of the weather.
“Thanks to El Niño really, there hasn’t been a whole lot of demand for heating oil, and that’s leading supply to greatly increase, thus reducing the price of diesel fuel,” said DeHaan.
The average price of gas and diesel will ebb and flow throughout the year, but predictions state the national average will peak in May with gas somewhere in the $2.70’s per gallon.
Also, something to consider: according to the American Petroleum Institute, Michigan drivers pay one of the highest combined tax rates at the pump in the country. Data from October 2015 show Michiganders pay 52.24 cents per gallon in combined local, state, and federal taxes within the price of gas per gallon.