Michigan's Other Big Problem: Oil Prices

Detroit is one issue, but the Great Lakes State has some others.

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**FILE** The Marathon Oil Company Detroit Refinery is shown in a Nov. 2, 2005 file photo. The House, eager to do something about record high gasoline prices in advance of the Memorial Day weekend, voted narrowly Wednesday, May 23, 2007 to approve stiff penalties for those found guilty of gasoline price gouging. The bill directs the Federal Trade Commission and Justice Department to go after oil companies, traders or retail operators if they take "unfair advantage" or charge "unconscionably excessive" prices for gasoline and other fuels.

Months before Detroit grabbed national headlines by filing for bankruptcy, the entire state of Michigan was feeling the pain at the pump with many markets at or near $4.20 per gallon. Four or five refineries serving the Great Lakes region had maintenance problems and reductions in output – all at the same time – and that led some markets in Michigan (Indiana and Illinois too) to see prices higher than Hawaii.

Since there's only one refinery in the whole state,  state Sen. Rick Baker, R-Grand Ledge, says it's time to build another one to maybe ensure a healthier gasoline supply and more palatable retail prices.

Jones wants to build a "portable" refinery similar to those under way in North Dakota to produce fuel to keep the trucks and equipment running for the energy boom's uninterrupted growth. The smaller modular units are less expensive to build and can be disassembled and relocated when and if the need arises.

[See a collection of political cartoons on gas prices.]

Jones filed his bill proposing a new Michigan refinery last week. He said he'd use the Michigan Strategic Fund to give prospective partners a 10-year property tax and business tax abatement. Given the prospect of a federal bailout for Detroit after its $18 billion bankruptcy, it could be difficult for the state to extend the incentives that Baker envisions. And at the same time, it might be impossible to attract anyone to build and run a refinery without the tax breaks, considering that many other states would likely be willing to roll those dice.

Refinerynews.com reported last week that state House Democratic Leader Tim Greimel of Auburn Hills, who hadn't yet seen details in Jones' bill, said the idea merits consideration; and, Gov. Rick Snyder, who has used tax breaks to attract businesses, said it's too early to take a public position on Jones' proposal.

While building a new refinery may not necessarily reduce retail prices,  one would have to be encouraged by the logic of it. Energy is booming in North Dakota, Texas and Canada. Could a new refinery in Michigan, capable of refining fuel from Canada's tar sands, become a key regional asset? Would it create jobs? Let's hope Baker's refinery isn't sacrificed by Detroit's political horse-trading.

Gregg Laskoski is a senior petroleum analyst for GasBuddy.com.

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