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Inflation and war continue to bring uncertainty to this summer energy price outlook for Michiganders.
The MSPC’s Michigan Energy Appraisal Summer Outlook 2026 finds that the impact of the unrest in the Middle East and Ukraine continue to impact costs of gasoline and diesel fuel and other distillates, with supply disruptions pushing up costs. The geopolitical tensions in the Middle East, including the closure of the Strait of Hormuz, a crucial shipping route, are putting significant upward pressure on refined petroleum products such as gasoline and diesel at a time when inflation was already rising.
Here are highlights of the annual report.
GASOLINE
- Michigan gasoline sales are expected to decline by 4.17% in 2026 compared to the year before. Americans are expected to slightly reduce their driving to compensate for high inflationary pressures and elevated gas prices.
- According to AAA Michigan, the average price statewide for a gallon of regular unleaded gasoline on May 15, 2026, was $4.88, up more than 51% from $3.23 per gallon a year ago.
- The U.S. Energy Information Agency (EIA) had projected that Midwest regular-grade gasoline would average $4.07 during the current summer driving season, up from $3.02 in 2025. Given the geopolitical and economic impact of the U.S. war on Iran, the projections are likely to change. Unforeseen refinery outages, further international political unrest, adverse weather conditions or other disruptions to supply could add additional pressure and lead to higher product prices.
- Nationally, gasoline inventories are 4.7% lower than the 5-year range for this time of year. For the week ending May 8, U.S. total gasoline inventories were at 215.7 million barrels, down 9 million barrels from the same date in 2025. Midwest inventories were at 45.6 million barrels, 2.8 million barrels lower than last year.
PETROLEUM
- U.S. crude oil production averaged 13.59 million barrels per day (b/d) in 2025 and is expected to increase to 13.65 million b/d for 2026 and higher in 2027.
- U.S. crude oil stocks are currently 11 million barrels higher than a year ago. As of May 8, 2026, the U.S. had 452 million barrels in inventory, a 2.5% increase from 2025.
- Oil prices surged above $113 per barrel following disruptions tied to the Strait of Hormuz and regional attacks on energy infrastructure in the Middle East, though the EIA projects that West Texas Intermediate crude oil will average $85.68 per barrel for 2026 and $74.39 per barrel in 2027.
DISTILLATE FUELS
- No. 2 home heating oil prices ended the 2024-25 heating season at $4.50 per gallon, $1.48 higher than the year before.
- According to AAA Michigan, the average price of on-highway diesel fuel in Michigan was $6.20 per gallon on May 15, 2026, an all-time record-high and $2.70 per gallon higher than the price seen at this time last year.
- However, the EIA expects retail prices for diesel fuel to average $4.76 per gallon for the whole of 2026, up $1.10 from 2025. The EIA projects distillate prices will ease somewhat in 2027, with prices estimated to average $4.38 per gallon.
- For the week ending May 8, national inventories of distillate oil were 102 million barrels, about 1.02 million barrels lower year over year and 9% lower than the 5-year average. Midwest inventories for the same week totaled 24.2 million barrels, 375,000 barrels higher than 2025, 9.4% below the 5-year average.
ELECTRICITY
- If typical weather holds, total electric sales are expected to decrease 0.6% to 99.5 terawatt hours (TWh) in 2026, down from 100.1 TWh in 2025. Residential sector electric use is expected to decline 0.7%, 0.5% in the commercial sector and 0.7% in the industrial sector.
- Residential electric customers saw a weighted average rate increase from April 2025 to April 2026 of 4.6%, reflecting broad inflationary pressures, higher costs for fuel used to generate electricity, and infrastructure investments.
- While residential electric rates are higher in Michigan than the national average, U.S. Energy Information Administration data show that average electric bills in the state remain lower than both the national average and the average for other Great Lakes states.
NATURAL GAS
- Michigan’s natural gas consumption is expected to rise 6.5% in 2026, pushed up by factors including increasing use of natural gas in electricity generation. Residential usage is expected to increase 0.9%, with commercial and industrial sector usage declining 3.7% and 3.3%, respectively. Demand for natural gas from the electric power sector is expected to increase by 19.7% after falling by 4.7% in 2025. Federal weather forecasts call for this summer to be 0.3% cooler than historical averages.
- The EIA expects Henry Hub natural gas prices to average $3.64 per thousand cubic feet (Mcf) for 2026, a 0.5% decrease year over year.
- Natural gas storage levels in Michigan are projected to be about 447 billion cubic feet at the end of 2026, 0.8% lower than in 2025. Michigan has over 10% of the nation’s available underground storage capacity for natural gas, the largest of any state.
Michiganders struggling with increased energy costs have several options for help.
The MPSC’s one-stop webpage for utility assistance, www.michigan/gov/mpsc/gethelp, provides information on financial assistance, payment plans, consumer protections and more.
Those having trouble paying home energy costs also may contact their electric or natural gas utilities for information or contact Michigan 211 by calling 211 or going to www.mi211.org. Michigan 211 is a free, confidential service that connects Michiganders with a broad range of assistance programs and services and other resources, including help with food, housing, transportation and home energy bills.
Energy assistance information also is available through the MPSC’s energy assistance tip sheet. The MPSC’s consumer tip on beating the heat has suggestions on reducing energy use to help lower bills. The U.S. Department of Energy has additional spring and summer tips for saving energy.
The MPSC serves as an expert, impartial regulator committed to consumer protection, fairness and transparency. For information about the MPSC, visit www.michigan.gov/mpsc, sign up for its monthly newsletter or other listservs. Follow the MPSC on Facebook, X/Twitter, LinkedIn or Instagram.
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