New Pain at Pump: Gas Tax Hikes
Several states are considering raising the tax on gas to try to balance budgets.
Feb. 21, 2009— -- The United States is in a recession with millions of Americans struggling with being out of work, and now a dozen states across the country are proposing tax increases. They are considering an idea to raise the gas tax.
The idea is being considered, even as American drivers are beginning to notice gas prices inching back up and are already asking why, during a recession, the big oil companies are seeing increasing profits.
One governor interested in this idea is Deval Patrick of Massachusetts, who wants to raise the state's gas tax by 19 cents, bringing it from 23 cents a gallon to nearly 43 cents a gallon. It would become the highest gas tax in the nation.
Patrick isn't the only governor considering it. Lawmakers in New Hampshire, Illinois, Oregon and Ohio are all looking to raise the gas tax, too.
"Believe me, this is not something I'm doing joyfully," the Democratic governor said.
Patrick said the cost to consumers will be the equivalent of one large cup of coffee a week. But no matter what it is, drivers are not happy.
"I just can't afford it. It's too high, too high," driver Francis Rivers said of the price at the pump.
The average price of a gallon of gas is a dime more than it was just last month, and the increase has come as the price of oil itself has gone down, so many people are wondering why gas isn't following suit.
Stephen Leeb of Leeb Capital Investments and author of the book "Game Over" said this happens because people are buying more than expected.
"The refiners, the people who take the oil and turn it into gasoline, haven't been turning as much into gasoline, so what you have is gasoline inventories, actually less than it was a year ago," Leeb said.
The higher demand combined with lower inventory, is pushing prices up. This is also bringing profits up for the oil companies, too. Last month, the average profits were $18 a barrel, compared to the average profit of $8 a barrel over the last decade.
It is very possible that consumers will have a hard time looking at oil company profits of $18 a barrel.
"Were it to continue, I guarantee you they'll be up there in front of Congress, just as the automobile makers and bankers were up there," said Art Cashin, director of floor operations for UBS.
This weekend, OPEC, the organization of 13 countries that export oil, continued to say it may cut oil production again when it meets in coming weeks, which could likely send gas prices up even more.