Drivers Will Pay More At Pump If Oil, Gas Pipeline Shut Down
Estimates vary on the effects of closing Mackinac Straits pipeline
If the two Enbridge-owned oil and gas pipelines running along the bottom of the Straits of Mackinac were to be shut down tomorrow, the effects on Michigan’s economy and its residents would be immediate and widespread.
An immediate shutdown of Line 5 is unlikely, yet that is the preference of Michigan environmental organizations. Closing the pipeline is also the goal of state Attorney General Dana Nessel, who is looking at various legal challenges toward that end.
If the shutdown of Line 5 occurred unexpectedly and the state’s energy industry did not have enough time to prepare, Michigan gasoline supplies could be temporarily restricted, said Mark Griffin, president of the Michigan Petroleum Association. The result, he added, would likely be price increases of up to 30 or 40 cents a per gallon,
“In the short run, it will be very catastrophic, and over the long run, gasoline would be more expensive,” Griffin said. “Environmentalists want to not only shut down a pipeline, they want to shut down the production of fossil fuels in the petroleum industry and drive up gas prices. To them, Line 5 is a choke point.”
On an average day, drivers in Michigan purchase about 12 million gallons of fuel. Light crude shipped across Line 5 to be refined and sold at gas stations in Michigan accounts for about 45 percent, or 5.4 million gallons, of the total average amount sold in the state. That’s according to calculations performed by Michigan Capitol Confidential, with numbers from the Michigan Petroleum Association and Enbridge.
Michigan’s manufacturing and utility industries would also have to scramble if Line 5 were closed.
Much of the light crude oil from Line 5, which comes from Superior, Wisconsin, goes to Sarnia, Ontario, for processing. Some of the refined petroleum is then shipped back to Michigan, where it is used in manufacturing by companies like Dow, Ford and General Motors, as well as by some of the state’s electricity-generating power plants.
If the state’s energy and manufacturing sectors were able to prepare for the shutdown, the results would be more muted, though consumers would still notice. The exact change in Michigan gasoline prices is debated by environmentalists and those in the state’s energy industry.
A 2018 study from London Economics International for the National Wildlife Federation looked at what might happen if refineries in and around Detroit had to replace the light crude they receive from Line 5 with light crude from fuel tanker trucks and freight trains. It estimated that the cost of gas would increase by 0.65 cents per gallon. Alternately, the study estimated a price increase of 0.58 cents per gallon if the shipping capacity of Enbridge’s Line 78, which originates in the Chicago region, is expanded.
A 2017 study conducted by Dynamic Risk for the state of Michigan estimated that closing Line 5 would increase the cost of gas by 2.13 cents per gallon.
In a public comment from For Love of Water, addressed to then-Attorney General Bill Schuette and three Snyder administration department heads, the Traverse City-based group disputed the state-commissioned Dynamic Risk study. It said that the state could afford to shut down Line 5.
“The state and the public have been deprived of a thorough examination of whether the existing pipeline infrastructure in, through and out of the Great Lakes region provides a feasible and prudent alternative to Line 5,” the group said. “The significant water, economic, public health, and ecological interests of the State, local communities, the Tribes, and their citizens are not served by the continued operation of the Straits Pipelines.”
The petroleum association’s Griffin said that money spent on increased gas prices is money not being spent elsewhere in the economy.
“Every penny increase is equal to about $57 million on an annual basis. Two cents would be over $214 million. Somebody has to pay for it; it won’t be free. The last gas tax raised the cost of gasoline over $416 million per year. That’s money not being spent elsewhere in the Michigan economy,” Griffin said.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.