Why are Michigan's gas prices so high?

Apr 29, 2011

We’ve been hearing for weeks about gas prices rising around the country. 

The national average reached $3.909 today according to AAA’s Daily Fuel Gauge Report.

Michigan, with an average of $4.116, is more than 20 cents higher than the national average.

When we tweeted the new state and national gas prices on Wednesday, one of our Twitter friends asked why Michigan's average was higher.

The answer may be a combination of state taxes and delivery costs.

According to the April issue of Petroleum Marketing Monthly, Michigan’s gas taxes are around 19 cents a gallon, which is lower than the national average of 22.60 cents a gallon.

However, Michigan executes a 6% sales tax in addition to the 19 cent gas tax.

Comparably, Illinois has a similar gas tax (19 cents per gallon) and a slightly higher sales tax (6.25%), resulting in a slightly higher state average ($4.173 per gallon).

Iowa, on the other hand, has a higher gas tax (24 cents per gallon) but no additional sales tax, and comes in under the Michigan and national averages at $3.854 per gallon.  

In addition to state taxes, Michigan gas prices also reflect the fact that the state is at one end of a pipeline system that begins on the gulf coast.

Joanne Shore, the Team Leader of the Petroleum Division of the Energy Information Administration, says that although there are some closer refineries, much of Michigan’s gasoline arrives from refineries and refining centers on the gulf coast, including the PAD 3 Refinery.

Cross-country transport of the product can raise costs. And since Michigan is at the end of the delivery system, transportation costs are higher than they are for states positioned closer to the gulf coast, where much of America’s imported and domestic oil production enters the continental U.S.

The recent nationwide spike in gas prices is attributed to unrest in oil-producing countries like Libya and, more recently, to domestic refinery shutdowns caused by weather-related power outages in Texas, Alabama, and Pennsylvania.

-Brian Short, Michigan Radio Newsroom