Motorists in Michigan, Indiana, Ohio and Kentucky will likely see gasoline prices jump in the next two days, closing the door on the party that has seen average gas prices drop 32 cents in Indiana, 31 cents in Ohio, 29 cents in Michigan and 19 cents in Kentucky over the last three weeks. GasBuddy expects that by Friday, stations will see a price hike to $2.19-$2.29 per gallon, representing a hike of 45-60 cents a gallon for the cheapest stations in these states.
The likely hike comes as stations in these states to some of the lowest levels in the United States, with stations losing money but trying to stay competitive. It is a behavior that can cause wild price swings in these areas, called price cycling, as gas stations outdo each other cutting prices, leading to big losses. It's not likely to last long however, as these deep discounts are usually temporary and trigger several stations to adjust prices to stop the bleeding. The likely jump will be significant for stations selling at the lowest prices, as they're losing the most money.
"I would expect that in some cases, stations selling in Lafayette, IN, for example, at $1.66 per gallon could raise their price nearly 60 cents per gallon. It's likely they're selling somewhere 20-40 cents per gallon under cost to stay competitive, but that hemorrhaging will soon end and the station will restore some measure of sanity," said Patrick DeHaan, senior petroleum analyst at GasBuddy. "The price cycling behavior is defined by this craziness, and the lower stations drop their price, the more people will believe a "normal" price seems insane."
Several stations in Indiana, Ohio and Kentucky have dropped as low as $1.66 per gallon, the lowest in the nation by far. "This could be the season's lowest pricing as refiners discount winter gasoline to incentivize stations and motorists to take it off their hands," DeHaan said.