Gas prices not as simple as fuel tax
Modified: Tuesday, Nov 27th, 2012
LINGLE – The fuel tax in Wyoming is 14 cents a gallon for diesel and gasoline. In Nebraska, the fuel tax is 27.1 cents per gallon.
Seems simple, right? Basic math says Wyoming gas should be cheaper than the prices found across the border. Really, it should be 13 cents cheaper, it would seem.
This was the opinion shared by one resident who called the Guide’s office a few weeks ago and a popularly held and believed notion throughout the region.
This concern is particularly important now, as some state legislators are proposing a 10-cent increase on the fuel tax to help make up for budget shortfalls the state experiences as Gov. Matt Mead proposes further financial cuts across the board. The differences in price are also magnified in a border county like Goshen, as residents often travel back and forth and could buy gas in either state, depending on price.
To put it simply, this direct fuel tax-gas price correlation does not hold, as a number of factors go into determining the price the consumer pays at the pump, often on a daily basis.
“What really drives it is the local market and competition, as far setting prices,” summarized David Hancock, general counsel for the gas station and convenience store chain Maverik.
And that’s about as simple as it can be explained, because, once all the logistical variables are factored in, the picture muddies.
Doug Chamberlain, special project coordinator with the Madden Brothers, in Torrington, explained his outfit sometimes goes over gas prices at the pump several times a day.
Gasoline and diesel must be pulled from a refinery or a “terminal” or “rack,” which is essentially a station to pick up the petroleum product. At one time, Chamberlain explained, the Madden Brothers had a truck to retrieve their own gasoline and diesel, which saved money that was passed to the consumer.
Now, like many other stations, the company relies on a distributor.
“We use one distributor primarily ... they monitor what our fuel levels are, and they send fuel to keep our tanks from running low,” Chamberlain said. “What we expect is for them to give us the best price that they can.”
This is determined by supply and a host of other factors. The freight to get the gas from point A to point B is important. Gas will normally be cheaper in Cheyenne than Torrington, for example, since the former has a refinery in the city.
This supplier price is where the fuel tax can be calculated, as Chamberlain said distributors will often charge Wyoming buyers a higher price, since they know they will receive less fuel tax money that eventually goes to the state.
“These refineries, they price depending on the customer. If they sell to a Wyoming customer ... they can charge more for it, which in turn we’d have to charge more,” Chamberlain said. “There’s all kinds of games that get played with that. You have to just deal with the hands that’s dealt you.”
These shifts keep people in the business on their toes, as far as prices are concerned. They can change daily, or sometimes throughout the day, and the competitive aspect also has to be kept in mind, as well. For instance, if the gas supplier suddenly has an uptick in pricing, an individual gas station probably won’t instantly jack up the price because this would make other gas stations in an area the favored choice for consumers. So, often, the rise and fall of markets are not instantly felt.
Stations like Maverik also have an advantage over smaller market gas stations because they can buy in bulk. Competition and costs still come into play for the larger company, though.
Hancock explained how customers can’t really see the fuel taxes, they’re an invisible cost, especially when compared to a sales tax, which a buyer sees directly on his or her receipt.
“It’s a tough business, as you can gather, there are so many different pieces of the pie that are cost elements,” he said. “One of those is the state and federal tax that the consumer doesn’t feel or see … and they don’t realize it’s 1,000 other factors.”
Overall, it’s a scientific calculation that is still “very, very difficult,” Hancock concluded.
As it stands the week after Thanksgiving, Scottsbluff and Goshen have very comparable gas prices. Cheyenne, however, is significantly cheaper to the tune of at least 15 cents at most stations. Prices have and will continue to fluctuate often.
Regardless, the number of variables that go into gas prices means the fuel tax does not have the sway many people feel it should, suggesting gas prices will continue to vary across state lines with or without Wyoming increasing the tax by 10 cents.