Why rising gasoline taxes worry the fuel sector

HOUSTON — A growing number of drivers are paying higher prices at the pump, as lawmakers across the country continue to view gasoline taxes as a handy way to pay for highway projects.

Advocates say the tax hikes help provide much-needed funding for improving transportation infrastructure.

But at least some energy industry players say anything that raises consumer prices has the potential for cutting their profits.

“We hate high gas prices,” said Rob Underwood, director of congressional relations at the Petroleum Marketers Association of America, which represents fuel wholesalers and retailers. “Anytime you have price increases, margins get decreased.”

While U.S. gasoline prices before taxes often differ region to region, they tend to respond to the same general market factors, including the price of crude oil, refinery output and seasonal demand.

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But varying taxes can cause significant differences for motorists at the pump from state to state.

Texans, for example, pay 20 cents per gallon in state gasoline taxes on top of the 18.4 cent federal tax. Californians, on the other hand, pay more than 52 cents per gallon in various state taxes and fees.

Despite a surging population and growing demands on the transportation system, Texas hasn’t increased its gasoline tax since 1991. Instead, voters will decide in November whether to divert more than $1 billion from the state’s rainy day fund for road projects.

Last year, at least five states — Maryland, Massachusetts, Pennsylvania, Vermont and Wyoming — all opted to increase the taxes that drivers pay on gasoline, citing the need for more money to pay for improvements to their road and transit systems.

‘It’s just time’

“We periodically go through these phases where it’s just time,” said Sean Slone, program manager with the Council of State Governments. “There were a lot of states that hadn’t done anything in 10 or 20 years.”

Texas isn’t among the states where a gasoline tax hike is under serious consideration, and the Legislature doesn’t even meet in regular session until next year.

But other states — of all political persuasions — are embracing higher gasoline taxes. Last year, for example, conservative Wyoming raised its gasoline tax more than 70 percent. Maryland, on the other end of the political spectrum, adopted a plan that could increase state gasoline taxes by 85 percent over three years.

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And as other state legislatures begin their 2014 sessions, more of them could consider tacking higher taxes on gasoline. Among states that might debate the topic this year, Slone said, are Iowa, Michigan, Minnesota, Mississippi, Rhode Island, New Hampshire, West Virginia, Wisconsin and Washington.

Meanwhile, there’s growing discussion in Washington about increasing the federal gasoline tax of 18.4 cent per gallon, which has been unchanged for more than 20 years and does not rise with inflation or with the price of gasoline.

One proposal to increase the tax by 15 cents per gallon has won the endorsement of a wide swath of stakeholders, from AAA to the American Trucking Association trade group to the U.S. Chamber of Commerce.

In a separate proposal, Sen. Barbara Boxer, D-Calif., an influential lawmaker on transportation issues, has advocated a tax on wholesale gasoline that would be a percentage of its price rather than a fixed amount per gallon, and therefore could increase as the price rises.

Road work needed

The push to raise state fuels taxes comes as transportation experts warn that the nation’s roadways need work.

Last year, the American Society of Civil Engineers released a report giving the country’s roads a “D” rating overall.

Budget analysts at the federal level and in many states warn that funding for road improvements is dangerously thin.

In 2007, a federal transportation commission recommended a gasoline tax hike of at least 25 cents per gallon. A different commission recommended a 10 cent gasoline tax increase in 2009. And a federal deficit panel said in 2010 the tax should go up 15 cents per gallon. Meanwhile, the Congressional Budget Office warns that the federal government could have trouble paying its transportation bills as early as next year if it doesn’t address the situation.

Advocates view gasoline taxes on consumers as a logical way to pay for roads because such taxes put the bill for maintaining roads on the people who use them.

Odds have improved

Joshua Schank, president of the Eno Center for Transportation, a Washington think tank, said while the odds aren’t great for a federal gasoline tax hike, since any tax is politically sensitive, “it’s got better odds than it’s had in the last 10 years.”

Schank said downstream fuel taxes don’t have much effect on the energy sector.

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But Underwood, of the petroleum marketers, says members of the trade group oppose a federal gasoline tax increase. The tax is charged to distributors, and while they may pass it along to retailer consumers, they fear that anything increasing their upfront costs would make it more difficult for them to get credit they need to purchase fuel.

Refiners’ viewpoint

Refiners also are concerned about the effects of gasoline price increases.

“Anything that impacts the consumer, our guys take very seriously and do care a lot about,” said Brendan Williams, senior vice president of advocacy for the American Fuel and Petrochemical Manufacturers, which mostly represents independent refiners.

Any rise in per-gallon prices, whether because of taxes or market conditions, can reduce demand for refiners’ products, he said.


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