Wednesday, June 19, 2013

AAA expects gas prices to drop but don’t spend that 53 cents yet

Don't expect the 23.5 cent a gallon of this Amoco gas pump.

Don’t expect the 23.5 cent a gallon of this Amoco gas pump.

It looks like Virginia will have Maryland motorists jumping across state lines to fill up their gas tanks. Virginians shouldn’t budget for the 53 cent savings per fill up just yet. See AAA report below.

As brought out during the debates over the transportation funding plan – if the Marketplace Fairness Act (taxing internet sales) that passed the U.S. Senate and looks to have a hard time in passing in Congress fails, the wholesale tax on gas in Virginia will go from 3.5 percent to 5.1 percent to make up for the shortfall slated for transportation.

Sen. John Edwards of Roanoke said if that happens consumers will not notice the change at the gas pump. He expects the same will happen with the elimination of the gas tax. “The dealer sets the price of gas on a supply and demand basis.”

Congressman Goodlatte had a word of caution on expecting the MFA to pass in the House. In response to an email through his Communications Director, Beth Breeding.

“I do not believe legislation like the Marketplace Fairness Act is sufficiently simplified yet. While it attempts to make tax collection simpler, it still has a long way to go. There is still not uniformity on definitions and tax rates, so businesses would still be forced to wade through potentially hundreds of tax rates and a host of different tax codes and definitions. There is also concern that despite disclaimers the bill could open the door for states to tax or even regulate beyond their borders. I am open to considering legislation concerning this topic but these issues, along with others, would certainly have to be addressed.”

Per AAA: After July 1st (just 12 days away) with the implementation of Governor Bob McDonnell’s transportation funding plan, Virginia retail gas prices should begin to drop by about six cents per gallon as the commonwealth’s retail gas tax is replaced with lower tax at the wholesale level. In contrast to the current 17.5 cents per gallon tax, The Virginia Petroleum, Convenience and Grocery Association (VPCGA) is estimating Virginia motorists will end up paying a total of 11.7 cents in taxes and fees for a gallon of gasoline through the end of the year (that figure includes the Virginia Petroleum Storage Tank Fee of six tenths of a cent).  

The difference should fill the pockets of Virginia motorists according to the America Automobile Association (AAA).“AAA urges the petroleum industry to pass gas tax reductions on to the consumer and not exploit the situation as an opportunity to increase profits,” said Martha Mitchell Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. In 2012, six of the ten most profitable companies worldwide were petroleum companies leaving some consumers skeptical. Motorists should not, however, expect an immediate impact or an exact six cents reduction per gallon as the gas in the tanks on July first was paid for under the current gas tax structure and fluctuations in the daily price of gas must be taken into consideration,” Meade added.  

Just how low will gas prices go? Soon Virginia motorists may find themselves in one of the coveted five most affordable states in which to fill up.  The average for a gallon of self-serve regular gas in Virginia today is $3.40.  Theoretically, if that price dropped by six cents, today’s adjusted price would be $3.34 making Virginia the fourth most affordable state in the nation to purchase gas. Only Mississippi, Alabama and South Carolina would come in lower in that scenario. Today, Virginia sits in the number seven spot, with six states boasting lower gas prices.  

Gasoline prices are heading in a different direction, however, in Maryland as a result of new motor fuel tax laws that go into effect in two weeks.  Virginia’s historic fuel tax policy transformation should give consumers just shy of a dollar more in their bank accounts with each fill up while the cost of gasoline in Maryland will likely increase by three and a half cents or so a gallon in the early stages of their new gas tax plan (or about 53 cents per fill up). 

That is only the beginning; however, as Maryland’s excise tax on gas will skyrocket by 21.1¢ in the out-years, leap-frogging from 23.5¢ per gallon now to 44.6¢ per gallon by FY2018. In the long term, Maryland could emerge as one of the most expensive places in the country to purchase gasoline. This could be welcome news for some Virginia gas retailers as penny-wise customers drive across state lines for cheaper gas prices at filling stations in Virginia.

Posted By Valerie Garner

Categories: Finance, Politics, State Politics

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Comments (2)


June 19th, 2013 at 4:32 PM    

I find it very interesting that the price of gas shot up about 14 cents a gallon at most area fuel stations over the past five days. Are they setting the table to lower prices back to where they were?

Valerie Garner

June 19th, 2013 at 5:17 PM    

I haven’t had to fill up in the last week. Please watch it Newt. You are the official gas price watcher and your alerts will appear here.

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