If California gasoline prices tumbled before Election Day, would you change your mind about a ballot initiative that calls for the repeal of the state’s new gas tax?
Last November, the state upped the gasoline tax by 12 cents a gallon to help fund roadway repairs, improvements and other transportation projects. Let’s politely say the new tax wasn’t warmly greeted: Come November, Californian voters will decide on a proposition calling for the reversal of the tax.
But even without the new tax Californians would probably be cranky about gasoline these days. Pump prices have been on the rise for two years, largely due to rising crude oil prices. But I wonder if the historically predictable post-July Fourth decline in fuel prices will make a difference, voting-wise.
It’s odd to me that in a state where almost everyone complains about traffic, so many folks seemingly don’t want to pay for road improvements.
Well, at least pay through a higher gas tax.
Form the start, California’s new gasoline tax was on rocky ground. The state has long been one of the priciest places to buy gasoline — with already high taxes, a long-running refinery shortage, and environmental requirements to use pricer-but-cleaner formulas in the summer.
So, the new tax gave the opponents a great battle cry: Highest gas taxes in the nation — depending on who’s doing the ranking.
Also, implementation of the tax — one big levy – runs counter to how other states have increased gasoline taxes: in smaller increments spread out over several years.
Plus, explaining the spending plans for the tax revenue has been challenging. And how do you argue that the tax is only one part of why pump prices are up?
Global energy markets haven’t been kind to drivers or the tax hike’s proponents of late. A price rollercoaster in gasoline’s main ingredient — crude oil — has whipsawed what you paid at the pump.
During much of the economic recovery from the Great Recession, crude oil prices ran well above $80 a barrel. Beginning in 2014, a glut of oil hammered energy markets. As a result, crude oil prices plunged to well below $40 a barrel by 2016. Since then, a price reversal has put crude oil around $70 a barrel.
And to date, while California gasoline is priced well below 2012’s record peak, drivers started this summer paying the most in four years.
Not an outlier
Just so you know, California isn’t the only state raising gasoline taxes.
As 2018’s second half starts, drivers in seven states face just-raised taxes on fuel, according to the Institute on Taxation and Economic Policy.
In fact, 27 states nationwide have increased gasoline taxes in the past five years – with Missouri voters facing an Election Day choice to become No. 28 with a gas-tax hike on their November ballot.
The underlying rationale for these tax hikes — spanning both red and blue states – is a relatively recent realization that more funds are needed for transportation projects. So who’s upped gas-taxes, mid-2018?
Oklahoma: The first time in 31 years, the state’s gas tax rate rose — up 3 cents to 19 cents per gallon.
South Carolina: Up 2 cents as part of a 12-cent hike that will be slowly phased in.
Indiana: Up 1.8 cents, based on a formula tied to inflation and gasoline prices.
Maryland: Up 1.5 cents, based on a formula tied to inflation and gasoline prices.
Tennessee: Up 1 cent, part of a phased-in hike that will total 6 cents.
Vermont: Up 0.42 cents, based on gas prices.
Iowa: Up 0.2 cents for fuels that are not blended with ethanol.
Nebraska: Cut by 0.4 cents under a formula tied to fuel prices and infrastructure spending. (Note: its fuel taxes are 1 cent higher than last year.)
‘Tis the season
California gasoline prices may have hit their peak for the year.
I tossed 23 years worth of pump prices, statewide and nationally, into my trusty spreadsheet to remind myself of gasoline’s strong seasonal pricing trends: On average, fuel is cheapest in January, peaks in late spring, then begins an ascent that lasts the rest of the year.
Using a government index — tracking all grades of gas by the Energy Information Administration — I found California gasoline prices are typically most affordable shortly after the new year begins. The same is true nationally, even if drivers elsewhere pay less for fuel.
Why the relatively predictable ups and downs?
Well, the typical year starts with less travel following the holiday rush. So, demand for gas falls. Plus, many folks are watching pennies, post-New Year’s, after overly generous gift giving. Remember, gasoline use is economically cyclical, too.
Those wintertime gasoline bargains are short-lived, though.
History tells us California prices rise relatively slowly but continually through mid-May. Driving — that’s demand for gas — increases, then there’s the switch to cleaner-but-costlier summertime fuel mixtures. And household budgets are replenished after holiday bills get paid off.
Since 1995, statewide gas prices on average peaked in mid-May – 20 percent above the lows of early January. So this year’s 50-cents-a-gallon jump to $3.70 — January low to May peak — was actually a below-average upswing (just 16 percent).
But this isn’t just a California thing.
Nationally, January’s price bottom is followed by a slow increase in prices that runs to early June. But the national index grows only by 18 percent, on average, from the wintertime low to the springtime high. (And in 2018, low-to-high was a 15 percent increase to $2.92 a gallon.)
Of course, historic cyclicality also suggests prices will fall for the remainder of the year as the summertime driving peak ends and the gasoline sold reverts to a more traditional (and cheaper) mix.
Apply historical pricing patterns to California gas prices as of July 2, and you’ll see drivers paying 23 cents a gallon less by Halloween, just before Election Day. Then, they’d save another 23 cents a gallon by Christmas. So, my formula says $3.16 at year’s end — a total 15 percent drop.
Will that make a difference in how people vote on the repeal-the-gas-tax initiative?
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