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New gas tax won't necessarily be passed entirely to consumers
Jul 3, 2013 - McClatchy Newspapers
CHEYENNE -- Wyoming's first fuel tax hike since 1998 took effect on Monday.
The state tax on gasoline and diesel will increase by a dime n from 14 cents to 24 cents per gallon.
But officials say that does not necessarily mean motorists will pay an extra 10 cents per gallon when they pull up to the pump.
Lawmakers, transportation experts and petroleum industry reps say it is hard to predict how much of the tax will be passed along to consumers.
"The street is what sets the price," said Mark Larson with the Colorado Wyoming Petroleum Marketers Association.
"The street market is so competitive that if I'm looking at a guy down street with a two-, three- or five-cent benefit over my price, I'm not going to jump my price up another dime (just because of the tax)."
He said it is possible that gas stations, refineries or distributors, which set the wholesale prices, could absorb some of the added costs from the tax.
"But (stations') margins are razor thin," Larson said. "So it could be that we (distributors) eat a little of the costs, they eat a little and some will be (passed on to motorists.) That's just the way the business works."
And motorists may not see a change in the prices right away.
Gregg Laskoski is a senior petroleum analyst for Gasbuddy.com, a website that tracks fuel prices across the country. He said fuel is often bought by gas stations days, or even weeks, in advance.
"So I wouldn't assume that just because the law goes into effect that the new prices will be immediately implemented," he said. "It could be a few days or more."
Larson agreed that any changes will be gradual.
"It will take some time for the markets to transition," he said.
The Legislature passed the increase earlier in the year in response to a $109 million annual shortfall facing the state Department of Transportation.
It is expected to generate $72.4 million a year with $47.2 million of that going to highway projects. Most of the rest will be sent to cities, towns and counties for their own infrastructure needs.
Prior to the bill's passage, state officials estimated the hike would cost $114 a year for the average family of four.
But some lawmakers say it will be less than that.
Rep. Michael Madden, R-Buffalo, was one of the main proponents of the fuel tax bill. One of his rationales for passing the legislation was that much of the increase would not be passed on to motorists.
Madden, who is also an economist, said this is because many fuel suppliers set their wholesale prices on a regional level.
Wyoming's current 14-cent tax is far below all of its neighboring states. Madden said that means this state now ends up paying for other states' higher taxes without getting any of the benefits.
"If a supplier was doing half their business in South Dakota and half in Wyoming n and (South Dakota) has a 24-cent tax and we have a 14-cent tax n they would average it out to 19 cents," he said. "So they would end up charging 19 cents (in Wyoming)."
He said the evidence of this is that gas routinely costs roughly the same or sometimes even less in the neighboring states than in Wyoming.