Gas Prices to Take Big Jump as State Tax Goes Up, Subsidy Expires
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Frank McNeill Jr. had been advising North Carolina drivers to fill up their gas tanks before today.
The state tax on gasoline will climb 3.9 cents a gallon starting today. In addition, the cost of ethanol will increase by 4.5 cents a gallon, not in a tax hike but in the expiration of a federal subsidy.
“We tried to get the legislature not to let it go through,” McNeill said of the gas tax hike. “The House voted to cap the tax, but the Senate ignored it and left town.”
McNeill, president of the Aberdeen-based McNeill Oil Co., said the N.C. Petroleum and Convenience Marketers organization lobbied both legislative chambers to cap the tax, but those efforts failed.
North Carolina’s motor fuel tax is determined according to a formula in place for decades. The formula reflects changes in the wholesale cost of fuel recorded during the previous six months. The tax change is usually six months behind on fluctuating wholesale gas prices.
The change in the gas tax is dependent on the formula built into a state law establishing the gas tax years ago. The state uses the tax revenues to maintain and repair existing highways and to build new roads.
Although the tax revenue is needed and is built into existing law, the legislature can vote to cap the tax on a temporary basis. Such a cap was proposed during a special session held in late fall, when the House voted in favor of the cap. However, the Senate had already adjourned without taking up the issue.
The increase in the cost of ethanol fuel reflects the expiration of a subsidy approved by Congress 30 years ago. Most regular and premium gas sold today contains 10 percent ethanol.
McNeill said the only exception to the 10 percent ethanol mixture is probably found at the coast, where boat owners fill up their tanks at local stations. He said ethanol and ethanol-mixtures do not work well in boats, and most retailers don’t bother to stock two types of gas.
“I thought it was a terrible idea to put it (ethanol) in gas in the first place,” McNeill said. “It was just a political feel-good thing at the time.”
McNeill said ethanol provides little more than negligible improvement in gas mileage, but it can cause damage to a car’s fuel system, especially in older vehicles.
The state needs the gas tax to continue highway maintenance and improvement, and North Carolina is credited with better quality highways than those found in many other states. However, North Carolina has the fifth-highest gas tax in the nation.
When the tax increase goes into effect Jan. 1, the price of a gallon of gas in North Carolina will include 38.9 cents in state tax and 18.4 cents in federal tax. With fees added, the total will become 58.55 cents per gallon. The tax for diesel fuel will climb to 68.55 cents.
McNeill said retailers have no choice but to add the higher tax to prices.
“We’ve already absorbed a lot of that cost,” he said.
McNeill also questions how much revenue the state will lose in sales along the borders of South Carolina and Virginia. South Carolina’s gas tax is 22 cents lower than the Tar Heel State’s, and Virginia’s tax is 20 cents lower.
“I wonder how much revenue the state is losing from people who live on the border, say at Rowland or Charlotte, who will be buying more gas in South Carolina,” he said.
The tax changes come on the heels of recent slight declines in the price at the pump. The tax increase will be in effect until the end of June, when another adjustment takes effect — just possibly lower to reflect the lower prices of the final six months of 2011.
Retail prices fluctuate according to miscellaneous marketing changes, from refinery operations to political issues around the world to availability to weather disasters. Turmoil in oil-producing countries can raise prices, and the latest specter is the threat by Iran to close the Gulf of Hormuz if additional sanctions are imposed.
The gulf is a major transportation resource for shipment of oil from the Middle East to the United States and elsewhere.
Contact Florence Gilkeson at florence@thepilot.com.
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Comments
DaveyNC 1 year, 4 months ago
Glad that the ethanol subsidy is gone, now let's get rid of ethanol in our gasoline. Though I will wager that the ethanol subsidy will soon be reinstated. Those corn farmers in Iowa expect it and right now, they get what they want.
Before everybody piles in here with the "why is gas more expensive in Moore County" questions, a better question to ask is: Who makes the most money from that gallon of gas? It's not Mr. McNeill and it's not the evil big oil companies and it's not the retailer. It's the outfit that will make 58.55 cents per gallon with virtually no overhead and with zero liability. Pretty good gig if you can get it.
Somewhere on this planet there must exist a fee or a tax that has shrunk. And monkeys will fly out of my b---.
Toda 1 year, 4 months ago
Some of the answers can be found on my blog.
Isn't Exxon still charging more per gallon to pay for the Exxon Valdez disaster? Always a penny or two higher.
DaveyNC 1 year, 4 months ago
Toda, nobody knows how to get to your blog. Gonna need a link.
ljc102376 1 year, 4 months ago
I should have stayed in Florida.
Toda 1 year, 4 months ago
DaveyNC 1 hour, 42 minutes ago=> Dave go to Readers Blogs on the front page....
JER 1 year, 4 months ago
You all may want to look up the latest statistic: What is the United States of America's leading export?
buddysmith 1 year, 4 months ago
bend over folks, surprize, surprize, the state wants us to pay more taxes!!! this time its for roads, next month the ole education sales pitch(which they dont need because they can stick us whenever they want). when you read this article, notice the fear that some people, that are living on the border of nc and va, are driving across the state line to buy gas. how dare they!!! maybe we should add an additional tax to border residents. we can call it the "suspected driving across the border to buy gas" tax. if the border folks complain, we can just say. well it is for better roads(the million dollar guard rails on us1 north comes to mind) or if they really object, we can say it is for education!!!
starman 1 year, 4 months ago
DaveyNC, maybe McNeil does not make alot of money on gas but I wonder why for the last 2 months gas at the Alco on 211 near the Hoke Co. line has been $3.19 and across the street it has been $3.29. Also last week in 7 Lakes gas was $3.24 but in Aberdeen and Southern Pines, probably 5 miles from the Alco, gas was $3.35 and $3.36
DaveyNC 1 year, 4 months ago
@starman It does not matter why. Maybe one place has to charge more because his mortgage is higher. Or his machines break more and he has to spend more on maintenance. Or because he is evil. I used to live near an old gas station that was 25 miles out in the boonies and at least that far from the nearest gas station. Really old place. He charged $1.50 more than what you would pay in town because, as he said, nobody will ever fill their tanks where he was, they would only buy enough to get them into town. So he made nice money on the little bit of gas he sold.
If you don't like the price at the $3.29 place, go across the street to the $3.19 place. It's just not that hard to figure out, is it?
Yukonjohn 1 year, 4 months ago
Sorry ya'll are getting hammered with State tax on gas. And yes, hopefully they will get rid of ethanol. They used to make us burn oxygenated fuel with MTBE in it. It was never tested in really cold weather, and it was making us sick. Our Gov. told the EPA to "stick it" and he made the feds stop sending that gas to us. It is a shame that your tax is so high. We don't have taxes because of our oil, but our gas prices are usually at least a dollar or more a gallon than ya'lls. Out in our villages, it runs from 6-10 bucks a gallon.
JER 1 year, 4 months ago
So nobody cared to look up the fact that in 2011, for the first time ever, the leading export from the USA was fuel. I know that answer was not one of my first ten guesses. Guess we're better off than we thought.
debsalomon 1 year, 4 months ago
Hate to be so simplistic, but if every car owner cut 10 miles per week off his or her driving the effect would be dramatic: less demand, lower prices, better environment. It's not that difficult: plan your routes so multiple errands can be accomplished. Shop near home. Never drive around looking for a parking spot 100 yards closer to your destination. Carpool. Walk to the mailbox. Maybe the occupiers will take up the cause....Camp out in front of corporate offices.
Toda 1 year, 4 months ago
An excerpt from my blog in the readers section:
JER 1 year, 4 months ago
I'm aware that the bulk of our crude oil imports come from Canada, not the middle east. As noted above, a proposed pipeline would carry crude from Alberta, Canada to points in Oklahoma and Texas, where, I assume, the crude would be refined. I'm not an oilman so I don't know the answer to this question: Why don't they build refineries in the Seattle area and refine the crude there? The jobs still get created and we don't put 1700 miles through the heart of the country at risk of an environmental disaster. Having the refineries located closer to the source and on the west coast would allow shipments of refined fuel to the areas we export to: South America and Asia.
But none of this is a solution to the real problem. We need to find and perfect alternative sources of energy. "Drill, Baby, Drill" is just further extending the problem. As debsalomon notes above, we need to start weening ourselves off our oil "drug".
Toda 1 year, 4 months ago
JER => It has more to do with politics than common sense. One finds it interesting that the pipeline will go through Oklahoma and end in Texas. It's more about oil revenues than jobs. How many people know how to operate a dozer with a side-boom to set pipe? They may employ welders to weld sections of pipe. Other than that, not too many jobs for average Americans will be generated. Si Habla Espanio?
mrab28315 1 year, 4 months ago
StrongI hate that the prices keep going up on gas as well as other things. But remember this when you go to poles to vote.The people we vote in are the ones who speak for us at meetings.Also Moore county has is always one the highest on everything.
Thatcher 1 year, 4 months ago
http://www.ihatethemedia.com/earth-day-predictions-of-1970-the-reason-you-should-not-believe-earth-day-predictions-of-2009. Funny predictions about oil, the earth, etc. Wonder where these guys are today? Enjoy!
JER 1 year, 4 months ago
wdd101st: Do you know how to use Google? When you try it, you'll find that Canada and Mexico are first and third in supplying the US with crude oil. Also, there are already five refineries located in the state of Washington that are owned by the big oil companies. We already have nuclear power plants, there are already many wind farms out west as well as other parts of the US. Trying to blame environmentalist for our lack of will in getting off the oil "standard" is a cop out. The environmentalists are there to insure that whatever we do, we do it with the least amount of impact to the quality of our environment. Sometimes we have to make decisions like: do I want clean air or do I want to order a pizza from my smart phone?
JER 1 year, 4 months ago
wdd101st: Hey, don't forget China. They are our mortal enemy as well, right? All we have to do is piss them off and they will quit sending us cars and TVs and computers and phones and clothes, and kitchenware and sporting equipment and everything else we can't live without. Of course, they may quit loaning us our money back too.
Everything you say in your post should give you even more reason to demand we find alternative energy sources NOW and start weening ourselves off our oil addiction. That IS our best answer!!
molonlabe 1 year, 4 months ago
D: All of the abve!
JER 1 year, 4 months ago
wdd101st: Sorry my comment about using Google came off sounding like it did. Whenever someone posts a link, it is usually from a source that they found that reinforces their position. As we all know, you can find a source to reinforce any position on the web. What I was trying to say to you was to not take my word for it or only look at my sources but rather look it up for yourself and draw your own conclusions.