Prices at local pumps surged above $3 per gallon for the first time since October 2014.
This spike comes at a time when many local families may be planning summer road trips and companies are trying to trim budget expenditures.
B.J. Wade, who works in sales for Advance Signs in Ferrysburg, fueled up his company car, a black Chevy Tahoe, at the Shell station in Spring Lake on Tuesday afternoon, where regular unleaded cost $3.09 per gallon.
“They're high,” Wade said of Tuesday's gas prices. “They've been trending up.”
Although Wade said higher prices won't affect his summer vacation plans, he said they will affect his company's bottom line because of the increased cost to fill the tanks of vehicles and equipment.
According to a Chicago-based fuel price forecaster, pump prices could remain high for the foreseeable future.
“It's not what we like to see, but there's not much we can do about it,” said Patrick DeHaan, head of petroleum analysis for GasBuddy.com. “We're being weighed down by the Iran nuclear deal, which has a slight impact, maybe a few cents per gallon.”
The larger story is OPEC, which is entering its 17th month of production cuts.
“That has been remarkably effective at cutting the glut of crude oil we had a couple of years ago,” DeHaan explained. “We are far removed from the glut. Now, we're in a position where we have a strong economy. U.S. oil inventories have plummeted in the last year, year and a half, as a result of cuts.”
DeHaan said it's mostly “good old-fashioned supply and demand” that led us over the $3 mark for the first time in four years.
“Supply is down, prices are up,” he said.
Summer gas prices are difficult to predict, according to DeHaan.
“The issues driving prices up are hard to predict moving forward,” he said. “The situation in Iran, we're kind of waiting to see if U.S. allies and partners will follow the lead with sanctions. Venezuela, if they can turn their fortunes around.”
Venezuela’s crude oil production hit a 33-year low in the first quarter of the year, down 28 percent in 12 months. Refineries there are operating at a third of capacity, and its workers are resigning by the thousands.
“Until we have some sort of better idea, I don't know if we'll see sizable relief,” DeHaan said. “We normally see some relief in the month of June after refineries have finished maintenance. With Venezuela and Iran over our head, I don't think we'll see any noticeable decline this year.”
DeHann said there's little consumers can do to fight back except to shop around for the best price. And, be thankful that you live in West Michigan, where price wars are commonplace.
Most stations across the country make 15-20 cents per gallon on gas. West Michigan stations often try to beat each other's prices, sometimes selling at a low profit margin, according to DeHaan.
“They'll start driving prices lower probably this weekend,” he said. “You tend to see a price hike every week to week and a half. Stations in Michigan don't sell gas based on what they paid. All play this game where they undercut each other. It leads prices down 10-15 cents a gallon, even if wholesale prices are up. This will happen until stations begin losing money. That's when you'll see another hike.
“Nowhere else in the nation do you get that opportunity,” he said.