Gas Prices Fall Below 50 Cents a Gallon in Michigan

CNBC is reporting that certain parts of Michigan are fighting “gas wars” where some stations are selling gas for as low as $0.46 a gallon:

While gas prices are low nationwide, some stations are slashing the fuel’s price to rock-bottom levels to the tune of less than 50 cents a gallon.

The drastic price cuts are part of a gas price war at three Houghton Lake, Mich., stations.

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During the last three days, the prices dropped below a buck per gallon, falling as low as 46 cents at Sunrise Marathon. Meanwhile, the Beacon & Bridge gas station was as low as 47 cents, said employees of each station in interviews with CNBC.

A nearby Citgo says its prices slumped to 95 cents a gallon.

There have been long lines at the stations for most of the weekend, according to the three stations, with police officers directing traffic in the area due to the congestion.

It’s not clear how long those gas price competitions will last, or if other localities around the country will experience similarly low gas prices, but they show a larger trend across the country driven by falling oil prices.

While falling oil prices generally lead to falling gas prices, what has some economists worried is the fate of the oil industry. As of this writing, oil is priced at $28.78 per barrel, down from about $105 a barrel in mid-2014. Oil prices falling as low as they are now are obviously good for consumers, but bad for the oil industry.

Writing for Fortune last month, Mike Scott explained why oil prices are falling:

The Organization of Petroleum Exporting Countries (OPEC) at its latest meeting in Vienna at the start of December decided to keep oil production at its current levels despite the recent drop in oil prices. But the level of disagreement that seemed to come with that agreement among the powerful cartel members surprised even seasoned observers. The result, observers say, is that there is now no supply discipline at a time when global demand, particularly from China, appears to be dropping.

On top of that, sentiment was also hurt by the United Nations climate conference in Paris, which seemed to suggest to many that the world leaders were more committed than before to switch their economies away from oil and other fossil fuels.“Paris is not the world saying it wishes it weren’t trapped in an abusive relationship with the fossil fuel industry; Paris is the world’s economy serving divorce papers,” pointed out Michael Liebreich, chairman of Bloomberg New Energy Finance. “A key point has passed, an irreversible process has started.”

And while declaring the end of fossil fuels is likely extremely premature, that kind of rhetoric is spooking the market at a time when prices are vulnerable.

So, OPEC decided to keep supply high while demand is dropping. The price will continue to fall, and some “doomsday scenarios” put oil around $10 to $20 a barrel. At that price point, the oil industry could go bankrupt.

Isn’t that what the Obama administration wants? If the oil industry goes bankrupt, what would we be left with? Solar, wind, and other “green” energy alternatives, many of which have benefited financially from government subsidies, and many of which have failed in spite of large subsidies. I’m not at all opposed to any of those energy sources. What is objectionable is that the government plays such an influential role in determining winners and losers in the market in the name of “protecting the environment.”

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