Watching Government Gasoline tax debate

With Patrick Crow
from Washington, D.C.

Not surprisingly, the politically motivated repeal of 4.3/gal of the federal gasoline tax in the U.S. has fallen victim to politics.

Senate Democrats have stalled the Republicans' tax rollback bill by linking it to minimum wage legislation on which the two parties strongly disagree (OGJ, May 13, p. 36).

Prospects for repeal are better in the House of Representatives, where a floor vote is expected soon.

The tax-writing House ways and means committee voted 21-13, generally along party lines, for a bill to suspend the 4.3 for the rest of the year.

The panel rejected an amendment by Rep. Charles Rangel (D-N.Y.) to require the oil industry to pass along the savings to consumers. Republicans argued that was not enforceable.

The House bill would repeal the tax only until Jan. 1, replacing the $2.9 billion in lost tax revenues by selling rights to additional radio frequencies and cutting Energy Sec. Hazel O'Leary's administrative budget.

Senate hearing

Meanwhile, the Senate energy committee conducted a hearing, which turned partisan, on causes of U.S. gasoline price increases.

Sen. Bennett Johnston (D-La.) said repealing the 4.3 tax was simply "a bribe to voters in an election year." Sen. Dale Bumpers (D-Ark.) agreed: "This is all political. Everybody knows it's political."

O'Leary assured the senators she has seen no indications that industry is price gouging. Her department and the Justice Department are conducting separate investigations.

She said market forces are beginning to deflate prices. "The trend is there. We're on our way."

Refiners and analysts told the committee the gasoline price jump was caused by higher crude prices at a time of low stocks.

Robert Beadle, Diamond Shamrock Inc. marketing vice-president, said the temporary market anomaly should not distract policymakers from "fundamental long term issues that will allow the industry to meet our growing demand for refined products in an efficient, low cost manner."

C.L. Blackwell, Chevron Products Co., said, "A difference of only a few cents per gallon can shift demand on our system from too high to too low overnight. That's why we are constantly adjusting our prices. As an example, we made more than 400,000 price adjustments to our products last year. We have to be competitive or very soon we will have our terminals overflowing."

Charles Walz, Texaco Refining & Marketing Co. vice president of planning, said statements by public officials that oil firms are price gouging or making excess profits "reflect a complete failure to understand fundamental rules of economics and the free market system that exists throughout the world for crude oil and petroleum products."

Matching the tax cut

Responding to the Washington events, ARCO, Texaco, and Chevron declared that if Congress repeals the 4.3 tax, they will cut prices at their company owned stations by that amount.

But all noted it is possible retail prices will not drop because they cannot control the prices their independent dealers charge and they cannot control market forces.