What happened at gas stations all across Minnesota on Nov. 1, 2007, on March 1, 2008, and on April 1?
Surely you know one of the answers. Yep, on April 1, the state’s gas tax increased by 2 cents a gallon.
You likely know that because the Minnesota House Republican Caucus issued a blistering news release when the gas tax increased for the first time in 20 years and the caucus went on TV with ads denouncing DFLers for supporting it. TV stations looped footage of motorists fuming about higher prices as they pumped gas into oversized SUVs.
In related news, voters were quoted as promising “to get even” with Republican legislators who voted with the DFL majority to approve the new gas tax and then to turn back Gov. Tim Pawlenty’s subsequent veto. Angry GOP activists denied re-election endorsements to Republicans for siding with the DFL in the override.
Republican legislators tried to amend a supplemental budget bill to temporarily cancel the state’s gas tax, mimicking a proposal by presidential hopefuls Sen. John McCain, R-Ariz., and Sen. Hillary Rodham Clinton, D-N.Y., to give voters a “tax holiday” by zeroing out the federal gas taxes through summer. The federal idea went nowhere, and DFL legislators in St. Paul beat back the attempt to halt all state gas taxes.
So, do you know what happened in Minnesota on Nov. 1, 2007? Yep, the state’s gasoline tax went up by 2 cents a gallon. Only then there were no TV ads and no fuming motorists on the evening news blaming politicians for adding to rising gas prices.
So, do you know what happened in Minnesota on March 1? Well, the state’s gasoline tax dropped by 2 cents a gallon and, again, there was not a peep of public mention.
The temporary gas fee of 2 cents a gallon at the distributor level goes on each time the state’s gasoline spill cleanup account drops below $4 million, and that’s what happened last fall. The fee is dropped when the account is replenished.
Not one of the more than 50 Minnesotans quizzed by MinnPost had heard about it, and only two — one a legislator and the other a former legislator — even heard about the gas spill cleanup fee.
Actually, the recently passed gas tax was for 8.5 cents that will phase in over several years (add a half-cent on Aug. 1, 3 cents on Oct. 1, and a half-cent a year after that).
What drives prices?
But it’s doubtful that with the steeply rising pump price of gasoline motorists would even notice — would it not be for the hoopla that accompanies any tax increase, however small.
That’s because pump prices are driven by major factors having little to do with “small” things like increases in state taxes, said Mary Welge of the Oil and Price Information Service (OPIS) in New Jersey.
Supply and demand are typically the drivers of crude prices, but worldwide supplies currently are in relative sync with demand, Wedge said. Now the oil price drivers are the falling dollar (world crude prices are denominated in the U.S. dollar) and futures speculators, she said.
As U.S. prices push past $4 a gallon for regular gas in most states, the 2 cents added by Minnesota’s gas tax don’t even figure into a rounding error (stations just a short distance apart price gas between 5 and 7 cents a gallon differently, according to one informal survey). Unlike a sales tax that is added to the price of goods, a gas tax is blended into the price and is only one — in this case negligible — factor in pricing.
This is but one of the myths of gasoline pricing in the mind of state Sen. Jim Carlson, DFL-Eagan.
Carlson said that if the full amount of Minnesota’s gas tax (currently at 22 cents a gallon) were canceled, one effect might be to encourage an increase in demand that would drive prices right back up. Which would mean, Carlson said, that Minnesota would be denied the benefit of revenue (about $165 million if the 22-cent state tax went on “holiday” for the three months of summer) for road and bridge repair and the price increase would fatten oil company profits.
Many states have considered nixing their gas taxes in response to surging pump prices, but so far only one — Georgia — has decided to postpone a 2.9-cent tax rise scheduled for July 1.
There’s another gasoline myth circulating that Carlson is quick to address.
During floor debate on the gas tax, some argued that U.S. supplies are being blunted (which in turn drives up prices) because new refinery capacity isn’t keeping up with demand, a frequent claim by those who blame environmental advocates for the lack of new refineries.
But existing refineries are being expanded. Carlson noted that the newly expanded Flint Hills Refinery in Rosemount now refines 320,000 barrels per day, nearly 13 times more than it produced in 1955 when it refined 25,000 barrels a day.