Why Fix Something That’s Fixing Itself? : Falling prices undercut the calls for repeal of gas surtax
Retail gasoline prices in California are starting to drift down from their recent peak because refinery output has caught up with demand. The wholesale price paid by dealers began to drop at the end of April, and pump prices, while they vary from area to area, are beginning to reflect the lower costs. How fast or how far prices will fall remains to be seen. In the volatile oil business, prices almost always go up faster than they come down. But barring refinery mishaps or, less likely, significant crude oil price hikes, the worst seems over for California and the rest of the nation. All the more reason for congressional Republicans to abandon their ill-conceived effort to repeal the deficit-lowering, 4.3-cent-a-gallon gasoline tax enacted three years ago.
There was never much of an economic case to be made for repeal, and not much in the way of a popular clamor for the cut. The gasoline surcharge, which raises $4.8 billion a year, costs the average motorist about $30 a year. Even with the surcharge, according to the American Petroleum Institute, drivers last year paid less for gasoline on an inflation-adjusted basis than ever before. Five gallons of gasoline, with the federal tax, on average still costs less than five gallons of bottled water, which has no federal tax.
If anything, many economists contend, the federal gasoline tax--18.3 cents a gallon, including the 1993 surcharge--ought to be higher, if not the $2 or $3 a gallon found in most of industrialized Europe and Japan then at least $1 a gallon or so to discourage consumption and its byproducts--pollution and congestion. That argument is of course politically unsustainable. It’s worth noting, however, if only to remind Congress that the American motorist can hardly claim to be overtaxed.
The turnaround in gasoline prices reflects market forces at work. Gasoline was in short supply for a combination of reasons, among them refinery problems in California and, elsewhere in the country, the delay in shifting from heating oil to gasoline output caused by prolonged cold weather. Now conditions are returning to normal, and it’s time to abandon all the election-year rhetoric about doing sorely beset motorists a favor. If the Republicans want to cut taxes before November they should look at something other than the gasoline surcharge. Provided, of course, they can agree--as they haven’t yet been able to--on how to offset the revenues that would be lost.
