It’s not just cars, houses and lumber that are getting more expensive this summer.
Be ready to shell out more money for energy this summer, too, the Michigan Public Service Commission said in its May 26 report. Gasoline, electricity and natural gas are all expected to keep getting pricier.
Gasoline may be the most noticeable, as prices have risen after the pandemic slashed demand in 2020 and forced prices downward. People traveled less when COVID-19 first hit, causing some suppliers to have more gasoline than they could store.
But as things “get back to normal,” gas prices are doing the same.
“It is expected that gasoline demand will rebound for 2021 with the easing of restrictions and the introduction of COVID-19 vaccinations into the general populous,” per the MPSC. “However, the extent of the rebound will likely depend upon future infection rates and the comfort level of consumers with traveling and the potential for exposure to the virus.”
Demand for gasoline in Michigan in 2020 was 3.9 billion gallons – down 15% from 2019.
Michigan gas consumption went down more than 15% in 2020, largely because of the pandemic.
As of mid-May, the U.S. was importing more than 1 million barrels of gasoline per day. At the same time in 2020, the nation was bringing in about half that – 526,000 barrels per day.
A gallon of gas in Michigan is averaging $2.94, per AAA Michigan, compared to $1.85 a year ago.
“No similar gasoline supply issues are expected entering this summer’s driving season as demand rebounds back closer to historical levels,” per the MPSC.
Nationwide, gas averaged $2.60 per gallon in 2019, $2.18 per gallon in 2020 and is projected to average $2.68 per gallon in 2021, per the MPSC. Keep in mind, gas prices vary by state because of different fuel tax rates.
A look at the costs that go into fuel prices.
Another factor at play: As vehicles get more fuel efficient and the popularity of electric vehicles grows, the demand for gasoline shrinks. The estimated all-vehicle fuel economy for the 2019 model year was 24.9 mpg and rose to 25.7 mpg in 2020 – an all-time high, per the MPSC.
New vehicle fuel efficiencies have increased by 29% between 2005 and 2019.
Another reason for higher prices: The Colonial Pipeline cyberattack. While it only directly impacted the east coast, it had residual impacts on the nation’s gas supply, raising gas prices about $0.07 per gallon on average that week.
State leaders have been tracking the issue and are working to keep Michigan’s supply secure. Most of Michigan’s gasoline comes from Marathon’s Detroit Refinery, as well as refineries in Chicago and Toledo, per the MPSC.
Electricity, natural gas prices up ,too
Thanks to COVID-19, electricity sales in Michigan were down 5% in 2020.
But that’s because the industrial sector was down 16% and commercial sector was down 6% – residential customers actually used nearly 7% more electricity last year.
This graph shows how industrial electricity usage plummeted during the pandemic and residential usage grew.
Weather is a major factor when it comes to electricity consumption.
May through September 2020 was 22% warmer than usual – one reason for the higher residential bills. The National Oceanic and Atmospheric Administration is projecting this summer to be 8% warmer than usual – forcing bills up again.
Electricity prices also vary widely by the supplier.
“Residential bills in areas of the central and western Upper Peninsula, where population densities tend to be lower and the local power grid is challenged by various constraints imposed on and by the surrounding electrical generation and transmission systems, continue to be some of the highest in the state,” per the MPSC.
Consumers Energy is expected to have the largest price increase of all Michigan electric utilities in 2021 – up more than 17%. Consumers will charge more per unit from 2 to 7 p.m. from June through September, as that’s when there’s the most demand for electricity.
A look at electricity prices for Michigan's suppliers.
Natural gas prices are also expected to be higher this summer. Demand is rebounding after a 6% decline in 2020.
The average resident’s natural gas bill is expected to be $824 from April 2021 through March 2022, which is about $63 higher than the year prior, per the MPSC. This summer, expect to pay around $3 per thousand cubic feet, compared to $1.95 per thousand cubic feet last summer.
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