Rollback seen for federal tax on U.S. gasoline

Congress is determined to repeal 4.3 of the 18.3/gal federal excise tax on U.S. gasoline this month.

Lawmakers are reacting to recent gasoline price increases, but the repeal issue is driven by presidential election politics (OGJ, May 6, p. 44).

Robert Dole (R-Kan.), the Senate majority leader and apparent Republican presidential nominee, is pushing for repeal of the tax by the May 27 Memorial Day holiday. Newt Gingrich (R-Ga.), speaker of the House of Representatives, shares that goal.

If Congress votes to rescind part of the federal tax, President Clinton, who formerly opposed the action, is expected to sign such a measure to capture some of the credit. The 4.3 additional tax was imposed as part of Clinton's 1993 deficit-reduction package.

A White House spokesman said repeal would cut tax revenues without any guarantee that drivers would see a reduction in gasoline prices. Clinton has said he would rather consider repeal as part of balanced budget talks.

Last week the repeal bill was stalled in the Senate by Democrats who wanted a vote on the administration's plan to raise the minimum wage.

Dole has not detailed how Congress will replace the $2.8 billion the tax would raise from June 1 through Dec. 31. The repeal bill would be effective only until Dec. 31, when it could be extended if Congress can find more offsetting revenues.

Politicians react

Spokesmen for the trucking, airline, railroad, and bus industries supported repeal at hearings before the Senate finance and House ways and means committees.

There was disagreement on whether repeal would help consumers. Dole said no matter what the price of gasoline does this summer, "if we repeal this tax it will be 4 cheaper at the pump."

Others were not so sure.

Sen. Byron Dorgan (D-N.D.) plans to offer an amendment to ban oil companies from keeping the 4.3 if the added tax is repealed.

Sen. David Pryor (D-Ark.) said, "We ought to look at the profits of the oil companies."

Sen. Daniel Patrick Moynihan (D-N.Y.) joked, "It is in the oldest American political tradition that when anything happens (with gasoline prices), you investigate the oil companies."

More seriously, he said, "We need this revenue. I hope we keep it. We'll not get it back."

Rep. Edward Markey (D-Mass.) said senior executives at six major oil companies have benefited personally by the increase in gasoline prices.

He explained the value of their stock options jumped $32.75 million in the past 60 days as their companies' stock prices rose. The companies were Amoco, ARCO, Chevron, Exxon, Mobil, and Texaco.

Markey said, "It looks like big oil company executives are crying all the way to the bank over the increased prices American consumers are paying for gasoline at the pump."

Sen. Paul Wellstone (D-Minn.) wrote major oil companies to ask them about their use of "just in time" inventory practices: "When inventory levels are so low as to impact the availability of gasoline, consumers and the economy can be exposed to the risk of price spikes by otherwise unremarkable increases in demand. My fear is that while oil companies may use this management technique to save money, the result is that the consumer may end up paying the price."

Sen. Frank Murkowski (R-Alaska), Senate energy committee chairman, said, "We are going to be facing increased gasoline prices. The Fourth of July we could be seeing gas prices substantially higher. I suggest they will be over $2, and in some parts of the country they could approach $3."

He also said, "The discussion of eliminating the 4.3/gal tax misses the underlying issue, which is the issue of supply and exploration for new sources of domestic oil."

Murkowski said Congress acted last year to improve energy supplies when it approved exploration in the Arctic National Wildlife Refuge in Alaska. "There is just one person standing in the way of opening this huge reserve that would give us energy independence, and that is President Clinton."

Other views

Phillip Chisholm, executive vice-president of the Petroleum Marketers Association of America, said marketers should not be blamed for the gasoline price increases.

Chisholm said between the beginning of February and April 26, wholesale prices of gasoline rose 20.25/gal while the retail price went up 14.21/gal. "This means that the marketer has had to 'eat' over 6 of the price increase."

He did not blame refiners for the price increases. "The factors contributing to the hike have been well documented. The cold winter, low inventories, uncertainty of new supplies entering the market, various refinery problems, increased consumer demand-all of these contributed to the situation.

"To the extent blame can be assessed, the government must step forward and accept its fair share. In the past 3 years several new fuels have been added to the market as a result of government decree. These include reformulated gasoline, oxygenated fuels, and low sulfur diesel fuel.

"At the same time, environmental regulations have discouraged construction of new storage tanks to hold these new fuels and encouraged closure of a number of storage facilities."

Chisholm recommended the government leave the market alone. "Historically, government efforts to manipulate the price or supply of petroleum products have been a miserable failure."

William Wilkins, executive director of the Road Information Program (TRIP), said the 4.3 tax would benefit motorists the most if it were used to repair the nation's road and bridge system.

Wilkins said Federal Highway Administration data show roads conditions have worsened 2 years in a row, going from 56% in poor or fair condition in 1992 to 61% in 1994, the latest years for which data are available. The nation's road and bridge system faces a $15 billion/year shortfall in funds required just to maintain current conditions.

Copyright 1996 Oil & Gas Journal. All Rights Reserved.