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Oil crisis should be a warning to Utah: Let go of the gas tax

Economic volatility reinforces struggles state governments have been grappling with of late. The time to wean ourselves off gas taxes is now.

SHARE Oil crisis should be a warning to Utah: Let go of the gas tax

In this March 18, 2020, file photo, gas prices are listed for unleaded at a gas station in Oklahoma City.

Associated Press

In Salina, near the exit to I-70, you could get gas Wednesday for $1.15 a gallon.

That’s according to the website gasbuddy.com. I didn’t actually go to Salina to check it out. Chances are, you didn’t either. Most of us aren’t going anywhere, which means we’re not even going to our neighborhood gas stations, which in my area were offering unleaded for $1.89.

Low gas prices right now are the equivalent of having the stomach flu as a child and having your parents say you can eat all the candy you want. Great news, but you just don’t have any use for it at the moment.

It’s a condition that reinforces struggles state governments have been grappling with of late. The time to wean ourselves off gas taxes is now.

My wife and I jokingly wondered Monday how many barrels of oil we could store in our backyard. That was the day the price for oil yet to be delivered in May fell to a negative $37.63, meaning sellers would have to pay people to take oil off their hands.

But really, this is not a joking matter. Few things are as unstable as the price of oil has been in recent decades, but when it collapses like this, it means the world’s economy is in big trouble. It means layoffs among drillers and oil workers, of course, but it also hurts myriad companies that supply the industry with pipes, trucks and other related things. The lack of demand for oil means people are buying fewer cars, which hurts everything from your local dealer to manufacturers and all the suppliers of parts in between. 

The past week may be just an anomalous blip in history — one caused by a foolish price and production war between Russia and Saudi Arabia and exacerbated by a pandemic — but no one knows when demand will return.

Imagine if Utah voters had approved a ballot question in 2018 that was to add 10 cents per gallon in taxes to help fund education. Imagine if state lawmakers had not repealed their hastily passed tax reform package earlier this year, which included a sales tax on gasoline. 

Yes, I know, the current economic slowdown is total and all-encompassing. All state revenue sources, including the income taxes that fund education, are likely down considerably over earlier projections. But if the COVID-19 crisis ebbs in coming weeks, the economy may regain some of its lost ground. 

Gas prices and demand, however, will remain volatile.

While pushing for higher gas taxes, some lawmakers said they understood it would be just a temporary fix, and that the state eventually would need to find a different way to finance road construction and repair. Gas sales already were facing pressures from more fuel-efficient cars and a gradual increase in alternative fuel vehicles. Now this.

But gas volatility is not new. Five years ago, lawmakers in some states were demanding investigations because gas prices had risen dramatically. Then, within a few weeks, prices dropped again and the investigations went away.

Twelve years ago, gas was approaching $4 a gallon, and a member of Congress told me it was a “Pearl Harbor” moment that would unite the nation behind the need to drill more. A few years later, prices fell so low that T. Boone Pickens called me as part of a nationwide media campaign to move the nation toward natural gas in order to defeat terrorism.

A system of toll roads or a mileage-driven tax may be just as vulnerable to periods of lagging demand — and no taxing scheme would compensate for today’s unique economic circumstances — but they would be less subject to the gyrations of a worldwide oil market, and they would capture more of a changing market. It’s time to get serious about these ideas. 

The good news is the United States has in recent years become one of the world’s biggest oil producers. The bad news is that U.S. oil is just as subject to worldwide supply and demand as oil produced anywhere else, and the size of the American oil producing industry means hard times here are felt harder.

For the record, you can’t store barrels of oil in your backyard no matter how much sellers are willing to pay. A large storage hub in Cushing, Oklahoma, has the exclusive contract for accepting oil being traded from abroad.

Market experts say the summer driving season already is considered a washout. No one knows when demand for gas will return.

Rest assured, it will, some day. But that won’t negate the need for Utah and other states to find new ways to fund highway needs.