LANSING – Michigan consumers and businesses are heading into summer facing rising energy costs as global conflict, inflation and growing electricity demand push up prices for gasoline, diesel fuel, electricity and natural gas across the state, according to a new 2026 summer outlook from the Michigan Public Service Commission.
The report lands as Michigan is already grappling with some of the highest electricity rates in the Midwest, mounting concern over AI-driven data center energy consumption, and increasing debate over who ultimately will pay for billions of dollars in future grid upgrades needed to support data centers, electric vehicles and advanced manufacturing growth.
State regulators warned that instability in the Middle East and Ukraine — particularly disruptions involving the Strait of Hormuz, one of the world’s most important oil shipping corridors — continues placing upward pressure on gasoline and diesel prices at a time when inflation remains stubbornly high.
There are signs some relief could eventually come.
Reports over the weekend indicated the Trump administration and Iran may be moving closer toward a temporary agreement that could reopen shipping lanes through the Strait of Hormuz, a critical global oil chokepoint responsible for roughly one-fifth of the world’s petroleum shipments.
But even if a diplomatic breakthrough happens quickly, energy analysts caution Michigan residents and businesses should not expect fuel prices to suddenly fall back to prewar levels.
Industry experts warn refinery bottlenecks, supply chain disruptions, shipping delays and lingering uncertainty in global oil markets could keep gasoline and diesel prices elevated well into late 2026. Analysts say it may take months before the full economic effects of the conflict unwind through global energy markets.
Michigan drivers already are seeing the impact.
According to AAA Michigan, regular unleaded gasoline averaged $4.88 per gallon statewide on May 15, up more than 51 percent from $3.23 a year earlier. Diesel prices climbed to a record $6.20 per gallon, increasing pressure on trucking companies, manufacturers, logistics firms and supply chains throughout Michigan’s industrial economy.
The report notes national gasoline inventories remain below normal seasonal levels while Midwest fuel supplies also continue tightening. Oil prices briefly surged above $113 per barrel following attacks on Middle East energy infrastructure and shipping disruptions tied to the Strait of Hormuz.
For Michigan manufacturers and technology companies, electricity and natural gas costs remain another major concern.
Residential electric rates in Michigan increased an average of 4.6 percent year-over-year, driven by inflation, higher fuel costs and utility infrastructure investments. While the MPSC said overall electric bills remain below national averages because of lower consumption, Michigan’s per-kilowatt-hour electricity rates remain among the highest in the Great Lakes region.
Natural gas demand also is expected to rise sharply in 2026, particularly from electric utilities increasingly relying on natural gas-fired generation to meet growing electricity demand. The report projects natural gas use from the electric power sector will jump nearly 20 percent this year.
That issue has become increasingly controversial as Michigan utilities seek approval for billions of dollars in new infrastructure spending tied partly to data center expansion and grid modernization.
Critics, including Michigan Attorney General Dana Nessel in recent data center proceedings, have warned residential and small business customers could ultimately shoulder much of those costs through higher utility bills.
Meanwhile, consumers are expected to cut back driving somewhat this summer as elevated fuel prices and inflation pressure household budgets. The MPSC projects Michigan gasoline sales will decline more than 4 percent in 2026 compared with last year.
The agency said residents struggling with utility bills can seek assistance through state energy assistance programs, Michigan 211 services and utility payment plans.
