Feds To Lower Gasoline Prices 18.4 Cents / Gallon?

gasoline

#1

Feds To Lower Gasoline Prices 18.4 Cents / Gallon ?

That’s how much tax is set to expire at the end of September. Our lawmakers would need to extend the highway funding bill to renew it.

A recently introduced bill would let states opt out of the federal highway program. That program uses some $32 billion in collected gas tax and some other fees to distribute about $50 billion to the states for road construction, maintenance and mass transit projects. Some feel that since the stimulus spending was used for this that the tax is no longer needed and cheaper gas would give our economy a boost.


#2

Yay- I hope they don’t renew it.


#3

Wrong way. We should pay at least as much as it costs to maintain the roads, and we’re not. Sounde like it needs to go up to about $.30 just to get back to even. Bad idea to drop it.


#4

Lowering the tax that is used to maintain the roads?
If that proposal doesn’t define the terms “wrong-headed” and “short-sighted”, then I’m not sure how else to explain the bizarre reasoning that this would represent.

With crumbling infrastructure being one of the many problems that our country is facing at this point, anything that would lead to a further weakening of the infrastructure is just…wrong.


#5

Not a good idea, IMHO. Our roads and bridges are already deteriorating faster than we can fix them. Reducing highway funding will just make it worse.

I know this will be unpopular, but gasoline taxes should be higher, not lower.


#6

Whether it’s a good idea or not, reducing the tax $.18 will not reduce the retail price $.18.
The gasoline vendors know you’re willing to pay x amount. They’ll likely take some of the difference in profits.


#7

Whether it’s a good idea or not, reducing the tax $.18 will not reduce the retail price $.18.
The gasoline vendors know you’re willing to pay x amount. They’ll likely take some of the difference in profits.

EXACTLY…And some people will think that it’s a GREAT idea…Gas will still be $4/gal…but the money will be going to sustain Exxon’s record profits instead of going to fix the roads.


#8

Nope, that’s not how it works. If the tax is eliminated gas prices will soon drop. If what you say is true (stations would keep the price unchanged), they why would prices EVER drop? Yet they do, and have been doing so, always.

If what you say is true, that the retailers just set the price to make maximum profits, then why are Marathon and ConocoPhillips divesting themselves of the low-profit refinery and marketing sections of their companies.

Not the way the world works.


#9

Dumbest idea I’ve heard of in a long time.

The federal government already spends more on road maintenance and construction than it collects in gas taxes, and they want to eliminate the primary source of funds? The gas tax is arguably one of the fairest taxes out there - it taxes those who use the service (the roads) roughly proportionally to the amount of repair needed because of that use, since that is determined by amount of use (miles) and stress load on the pavement (which is caused by weight which also increases fuel consumption). If anything it should be higher to fully fund road maintenance.

As for whether or not prices will drop - they would likely drop short term, but then another excuse would be found to prop up prices - or demand would increase, driving the price right back up. We’re still paying pump prices about where they were when oil was $115 per barrel in 2008, but it is $83 today. In 08, the refineries were running full-out and losing money, this year they’ve been running in the 80-90% of capacity range and making fistfuls of money. You think that they’re really concerned about passing on a lower cost?

This talk from the Tea party about eliminating gas taxes just proves that the S&P was right in downgrading US debt - its a completely irrational move to suggest, and shows how irresponsible politicians are.

Even the idea of allowing opt-out is rather dumb - many of the “red” states are recipients of far more in highway dollars than is collected from them, and these are the states where the reps are pushing for them to opt out - in other words, pay $1 less, but get $2 less in federal highway money…


#10

The FAA expeience shows that when a tax disappears, the sellers do not lower the price but keep the extra mobey as profit. In theory the supply demand curves should shift, but in practice they don’t.


#11

Nope, when oil prices drop, gas prices are soon to follow. FAA tax burp was just that, a few week issue that airlines didn’t know how to handle. Nothing like gas prices.


#12

The price of gas is set to make maximum profits. Thats the law of supply and demand. To truly understand this principle, you would need to take some courses at a local college, it would be difficult to explain in a single post here, but here goes anyway.

You could set the price of gas at say $1M, but you would be lucky to sell one gallon at that price. To operate a refinery to produce just 1 gallon of gas, it would probably cost you more than $1M, so you would loose money.

You could set the price at $0.01/gallon and you would sell every gallon that you could produce, but it wouldn’t cover your costs.

At any price point, a specific amount of gas will be sold. The cost of producing that gas is determined partly by the quantity of that demand. Two independent curves are developed. One curve is the price demand curve, as price goes down, demand increases.

The other curve is cost production curve. Generally as production goes up, cost goes down, but there are bumps in that curve. For example, lets say that you have 5 refineries each producing 10 million gallons per shift. With three shifts per day, you have a total capacity of 150 million gallons per day. There will be a bump in the cost production curve at each 10 million gallon point because of having to put on another shift. There would be a huge bump between 150 million and 150,000,001 gallons because you would have to start another refinery.

Now the two curves are plotted on a single graph. Where the price demand curve is above the cost production curve, that is profit. The point where there is the greatest separation between the two is the point of maximum profit.

Taxes are part of the cost production curve. A change in taxes will move the maximum profit point up or down on the graph. Most of the time, the maximum profit will move in the same direction as the taxes, but not necessarily the same amount. Near the bumps, a change in the tax could have the opposite effect on the price. Thats hard for people to accept, but it does.

The oil companies have computers programmed to determine this maximum profit point at least twice a day for every gas station they have. That is why you can see different prices for gas stations from the same company only blocks apart. Each oil company has their own cost production curves because of their different overheads, so the bumps don’t occur in the same places.

An $0.18 drop in the tax may not translate to an instant $0.18 price drop. It could drop more or less than that amount, and under just the right circumstances, it could even cause the price to rise. There are so many other factors involved in these calculations that it would be impossible for us to determine the exact affect the change in tax actually has on the price of gas. I.e, the price of oil goes up that day so we accuse the oil company of keeping the tax savings for themselves.


#13

The SECOND oil prices go up…gas prices go up…Then when oil prices drop…it takes WEEKS if not MONTHS for the new oil price to be reflected at the pump.

Oil companies keep the prices as high as possible…as long as people are willing to pay that price. They have MANY analysis that monitor this daily to determine the optimal price. If the oil companies raise the gas prices 20%, but there’s only a 10% dip in gas buying then the oil companies are making MORE money by raising the price. They are making RECORD profits with these high gas prices…They could easily lower the price 15-20 cents a gallon and still make a very good profit…but they don’t.


#14

The Feds are never going to cut taxing and spending. Never.
If they cut gas taxes by 18.4 cents they’re just going to raise taxes by 19.4 cents somewhere else to offset it.

Some years back we were taxed each year on Personal Property taxes. This means an assessement on your sofa, TV, refrigerator, etc, etc. The state finally decided to do away with this idiocy and some thought this wonderful. Not so fast.
I called the assessor and they said while the Personal Property tax was being eliminated in name, it was also being rolled over into the Property Tax category (home/land) and taxes would not go down one cent.
They also stated that Property taxes would never, ever go down no matter what.


#15

If the gas tax is going towards maintaining the roads, what happens when more and more people start using less and less gas(the 54.5mpg CAFE number)?


#16

“what happens when more and more people start using less and less gas”

If Oregon’s and Texas’ ideas happen, they’ll put a GPS unit on your car and charge you by the mile. Just the coward’s way out of raising gas taxes, to me…

But it is a problem with EVs, PHEVs, and natural gas vehicles - how do we get them to help pay for roads?


#17

Nope, that’s not how it works. If the tax is eliminated gas prices will soon drop.

Absolutely! The airlines just proved this when the FAA’s ability to collect ticket taxes expired and they lowered ticket prices accordingl. . . Oh. . Wait. . No, that’s not what happened.


#18

What’s the FAA fiasco got to do with gas prices, which go up and down on a daily basis based on cost and demand. Check out gasbuddy.com, plot oil price with gas price. Gas prices react almost in lock step with oil prices, by and large. And taxes are no different than oil price as far as gas sellers go, just another cost.

Maybe somebody will bring up herring prices while we’re at it…


#19

Well, you’re proposing that an industry will pass along tax savings to its customers if taxes are cut. I showed you an example from last week of how an industry pocketed the tax savings themselves, and did not pass it along to their customers.

The idea that a business (especially a giant one that has guaranteed buyers) is going to suddenly become benevolent and essentially give away money is ludicrous. We’re talking about an industry that wrote off the BP oil spill costs on its taxes and basically got reimbursed by the government for killing people and causing an environmental disaster. This is not exactly the kind of industry that’s suddenly going to decide to be nice to people.


#20

If you’ll look at the chart I linked (add oil price) you’ll see exactly what I mean, it happens every day. If what you say is true, why would gas prices drop with every oil price drop?