Gas prices remain constantPublished 11:17am Saturday, July 6, 2013
FRANKLIN—Many Franklin residents who have visited the pumps this week are wondering, “Where are my lowered gas prices?”
The Commonwealth of Virginia has had a gas tax in effect since the 1980s of 17.5 cents. In passing the latest transportation bill, the General Assembly decided to eliminate the per-gallon tax in favor of a 3.5 percentage tax on gas on the wholesale level. It will also increase the sales tax from 5 percent to 5.3 percent. Franklin and Isle of Wight will go to 6 percent total, as the Hampton Roads region is earmarked for transportation improvements.
Sales tax is 1 percent higher this week, but gas was about the same as it was last week.
“I am a little disappointed,” said Franklin resident Bill Billings. “I thought it was going to go down more.”
George Hoffer, Ph.D, a transportation economist with the University of Richmond, said that a lot more than just the tax affects this equation, including the price of oil, refinery margins and the tax. While Hoffer said it is hard to predict refinery margins, oil is at an 18-month high due to the conflict in Egypt.
Then, of course, there is the tax. Hoffer said that because of the elastic demand for gas, part of the savings will be kept by the producer, while the other portion will be pushed to the consumer, meaning that on its face, we are looking at a potential 6- to 7-cent reduction from the tax rate being eliminated.
As the Commonwealth of Virginia has not given a credit on gas that was previously paid for at the higher tax rate, gas isn’t likely to drop until those reserves are cleaned out, and the gas producers have bought gas at the newer tax rate.
“If you know your next tank will be higher than your previous tank, you will raise costs because you won’t have enough capital to pay for that next tank,” Hoffer said of replacement price theory. “When gas goes down, however, you don’t want to lower the price because you will lose on what you have purchased previously.”
Hoffer said he couldn’t predict when gas prices would go down, or if they would, simply because oil prices are rising. However, he did say that the relative price between North Carolina and Virginia would be favorable on the Virginia side in the future, thanks to the tax elimination.
Another possibility in the near future is that from station to station, the price of gas will vary more than normal.
“Stations that don’t turn over gas as fast will end up higher tax gas, while stations that turn over faster, will end up with lower tax gas,” Hoffer said.
Around the state, Gregg Laskoski, senior petroleum analyst with Gasbuddy.com, said that there was a nominal decrease of about 5 cents per gallon. This time last year, however, Laskoski said that gas prices were $3.14 per gallon in Virginia.
Del. Rick Morris, R-Carrolton, said the most important detail about this is that Virginia needs to fix its roads, and he said the additional sales tax would help.
“The reality is that Virginia roads are in horrible condition,” Morris said. “We are becoming less business friendly because of the roads and bridges. To attract new businesses, we need a solid road structure. And once you got them — the roads — you’ve got to maintain them.”
Staff Writer Stephen Cowles contributed to this report.