It's no mystery- with Isaac churning in the Gulf, there's a lot of volatility in gasoline and oil markets. After several days of weakness, Isaac recently made hurricane strength, much later than expected. Several days ago, some forecasts put Isaac as perhaps a category 2 storm, prompting a sharp rally in wholesale gasoline prices.

Prices took a huge jump in the Great Lakes, where Michigan retail prices jumped above $4 for the first time since March. Indiana saw stations raise to $3.99 while Ohio saw $3.95, all in response to yesterday's 32-cent per gallon increase in wholesale gasoline prices. With today's reality that Isaac is weaker than expected, wholesale gasoline looks poised for a big drop- especially in the Great Lakes.

This situation sets up a predicament: stations saw gasoline depots raise their prices yesterday evening to reflect the change in market prices. That jump caused them to raise their prices significantly in the Great Lakes, even if they hadn't yet bought the more expensive gasoline. After such a large jump, it would be likely that many stations refrain from refueling their underground tanks unless absolutely necessary. Even though, they raised their prices, expecting that wholesale prices would remain high. That doesn't look to happen. Wholesale prices could drop over 20-cents per gallon today, meaning stations raised their price, few bought the expensive gasoline, and now wholesale prices are only slightly above where they were a few days ago, but retail prices are much higher.

That situation could set up the case for price gouging- stations raised their prices, even though they didn't necessarily pay the higher price. Coupled with the fact wholesale prices are dropping sharply today, some stations may not have even had to spend more than 10-cents more than their last load, yet are charging a considerable amount more. In my opinion, that's clearly a case of price gouging.

Michigan's Attorney General said in a release “These circumstances are not a free pass for price gouging. My office monitors gas prices closely, and we will not hesitate to take action if evidence of price gouging surfaces.”

I certainly hope that stations do the honorable thing and lower prices immediately if they never bought the more expensive gasoline, but that remains to be seen. Even so, it is likely that the spike in Great Lakes prices today won't last long due to the steep decline likely to occur today.