Gas is suddenly a lot more expensive in Michigan — and Spirit Airlines just shut down for good.

Jer talks with GasBuddy head of petroleum analysis Patrick De Haan about Great Lakes refinery outages, record diesel and jet fuel prices, how a blockade in the Strait of Hormuz is pushing costs higher, and why that fuel shock helped finish off Metro Detroit–founded Spirit Airlines.

After, Jer digs into some details about Spirit's demise and we're looking for your Spirit experiences. 

You'll find the episode audio embedded above, here for download, and there's a lightly edited transcript of the conversation below.

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Jer Staes: Joining me on the line is Patrick De Haan. He is the head of petroleum analysis for GasBuddy. You can also find him on social media as the GasBuddy Guy. We’ve got a lot to talk about. Anybody who drives a car knows there have been a lot of changes.

Anybody who’s tried to fly at Metro Airport knows there have been changes. And a lot of it is tied into what’s happening with fuel in the world. So Patrick, it’s been a while. Welcome back to Daily Detroit.

Patrick De Haan: Yeah, thanks for having me.

Jer: Of course. Let’s start with gas prices. Fundamentally, what is happening out there? It seemed like, at least to me as someone who loosely follows the story, that for a while there were rumblings there might be issues. And then all of a sudden, it just feels like it hit very quickly. What’s going on in the world that’s affecting this?

Patrick De Haan: We’ve seen a lot of refining issues here in the Great Lakes states develop over the last week. Several refineries are either undergoing maintenance or have had unexpected outages, and that’s pushed the wholesale price of gasoline up considerably.

We’ve seen wholesale prices surging as cascading issues at about three refineries over the last week have caused wholesale gasoline and diesel prices to soar. Basically everything derived from oil in the Great Lakes has surged in value, including jet fuel.

The price of oil also surged early last week as President Trump signaled he was preparing for a longer blockade of the Strait of Hormuz, potentially measured in several more weeks or beyond. So it’s kind of a perfect storm if you’re in Michigan. You saw prices surge not only because of refining issues, but also because oil prices are rising on an extended blockade of the Strait.

All of it is bad news. It impacts gasoline supply in a significant way, and that’s why we’ve seen gas prices going up across the state. And it’s not just gasoline; diesel is now touching the six‑dollar‑a‑gallon mark. We are now at a new all‑time record high for diesel in Michigan.

Jer: Diesel has a lot of impacts too. People might think about their friend with a big truck, but diesel has farther‑down‑the‑chain impacts because it’s used by commercial trucking, right?

Patrick De Haan: Absolutely. Diesel is hugely impactful. This should be a concern for motorists across the country, because diesel prices going up are likely to impact just about everything in the US economy.

Jer: Yeah, because we’re so truck‑dependent with how we deliver our goods, as I understand it.

Patrick De Haan: That’s really it. It’s a major trickle‑down. The US economy, whether it’s trains, tractors or trucks, relies heavily on vehicles powered by diesel fuel, and a lot of that freight is delivered just in time.

Jer: One comment I’ve gotten from a number of listeners is, “I thought we made more gas than we need, or more oil than we need.” There’s been a lot of talk about that with improvements in extraction and fracking. I know the terms, but I’m not an expert. Why is it that if we can produce so much, our prices are still going up so much?

Patrick De Haan: What we produce in this country can be sent anywhere around the world. When you put your house on the market, you don’t accept the lowest offer. If somebody bids up what you’re trying to sell, you take it. Just like when you go to a car dealer, you don’t trade in your car for the lowest possible price. This is capitalism.

The situation has changed; supply and demand have changed in a significant way. There are many more buyers of that barrel of crude oil than there were a couple of months ago, and part of that is because a large amount of supply has gone offline due to the blockage through the Strait. There’s been a massive jolt to supply and demand. There are more hands in the same cookie jar trying to get crude oil, and the value of crude oil has inherently risen as a result.

We can’t fence ourselves off from that, because what’s produced in the United States is increasingly being sent abroad. Just in the last week, US oil and product exports have risen to new all‑time records. Countries overseas have bought nearly 100 million barrels of oil and refined products in the last seven days. When the supply we use here starts flowing out of this country, it starts impacting our prices.

Jer : With everything that’s been happening in the global landscape, I’m not going to ask you to make predictions, but I will ask: What are some of the conditions that need to change to start bringing these prices down?

Patrick De Haan: First and foremost, an improvement in the refining situation will likely start to push prices down here, whether that materializes today or in a week. As long as there aren’t new refining issues, and once refineries that had problems get back online, I do expect improvement.

But even after those refinery issues are sorted out, we’ll still be in an environment where the Strait of Hormuz and what’s happening there can impact prices. Right now, there’s word that Iran and the US may be trading attacks in the Strait of Hormuz. There isn’t a definitive way to tell exactly what’s happening, but even once the situation improves, we’re still stuck in a dynamic that’s been in play for the better part of two and a half months.

Until the Strait of Hormuz fully reopens, we’re likely to continue seeing upward pressure on what we pay at the pump, whether it’s diesel, gasoline or anything else — including jet fuel.

As a US‑based airline, this is probably one of the most difficult times. As a petroleum analyst, this is probably the most difficult time in my career to forecast prices, simply because we don’t know what will happen in the days ahead regarding the Strait of Hormuz.

Jet fuel prices are all over the map depending on where you are in the country. There is a profound difference in the cost of jet fuel right now in the Great Lakes, where it’s above five dollars a gallon, and in areas of the Gulf Coast, where that same gallon of jet fuel is trading more than a dollar less. It’s a huge amount of variety in jet fuel prices, and airlines have unique exposure to those prices depending on where their hubs are.

That’s certainly one of the problems Spirit found itself in. People had locked in low airfares, and then Spirit saw jet fuel prices nearly double. That’s a tough environment when fuel is one of the top costs for airlines and you’re allowing people to book weeks and months in advance.

When the price of jet fuel goes up after you’ve sold those tickets at lower assumptions, airlines have to figure out how to bridge the gap.

Unfortunately, Spirit had financial problems over the last few years. Part of the reason it succumbed to bankruptcy is that fuel is a major cost, and with low airfares and high fuel prices colliding, it was simply too much weight.

Jer: So that will also drive prices up for air travel in general, not just because of the lack of competition in some markets. It seems like depending on which carrier you are and where you’re based, your costs are going way up, which at some point has to impact ticket prices, right?

Patrick De Haan: Absolutely, and they already have. Airlines haven’t disguised the fact that they’re quickly adjusting airfares, and I’d expect more of that as long as prices remain elevated. I booked an airfare before this situation between Chicago and Italy for August. That same airfare has risen by 500 dollars in the last few weeks. It’s gone from $737 dollars to almost $1,200, a jump of nearly 54%.

Airlines are trying to stay ahead of this, especially when thousands — really millions — of Americans may have already made their summer travel plans and booked their tickets months in advance.

It could become problematic. And with less capacity, fewer airplanes flying, Americans may face more upward pressure, not just from the fuel cost component, but also from limited airline capacity.

Jer Staes: I really appreciate your insights, Patrick. Thank you so much for joining us on Daily Detroit. Check him out as GasBuddy Guy on social media and make sure to check out GasBuddy.