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Fuel prices have risen rapidly in recent days, even before the United States and other countries pledged to stop importing oil and gas from Russia as that country continues its horrific invasion of Ukraine. This is prompting questions about the price spikes and what, if anything, can be done about them.
International sanctions against Russia, a major producer of oil and natural gas, are part of the reason for rising costs in the U.S. and elsewhere, Car and Driver explained. Increased demand for gasoline as people drive and travel more with the economic recovery and easing of the COVID pandemic also plays a role. So, too, does the seasonal shift from winter blends of automobile fuel to summer blends and refinery maintenance.
Last week’s jump in gasoline prices was the second largest on record, behind the 49 cents per gallon jump during the week of Sept. 3, 2005, when Hurricane Katrina hit the Gulf Coast, according to GasBuddy.
On Tuesday, gas prices surpassed the record high from 2008. Adjusted for inflation, however, gasoline prices remain lower than the 2008 record. In that year, global demand for oil, especially in China, rose as supply stagnated.
In Maine, the average price for regular gasoline on Friday was $4.30 a gallon.
Prices are expected to climb higher as sanctions against Russia and its invasion of Ukraine further strain global fuel supplies.
It is also worth noting that oil company profits have soared in recent weeks. Projected annual profits for the 21 companies in the S&P 500 energy sector jumped 7 percent in just four weeks, according to Investor’s Business Daily. The companies are projected to make $7.7 billion more in collective profit this year than analysts thought just a month ago, according to the publication’s analysis.
But, if you’re not a stockholder in an oil or gas company, the news is not good. Gasoline accounts for 3.4 percent of household spending, so rising prices will pinch many consumers.
Against this backdrop, a proposal from former Gov. Paul LePage to cut the state’s gas tax in half and halt toll collections for a few months may sound appealing. One Republican lawmaker suggested suspending entirely the state gas tax, which is 30 cents per gallon, for a year.
A three-month suspension of the gas tax would cost roughly $57 million, while halting tolls over the same period would likely cost the Maine Turnpike Authority around $36 million, the BDN’s Jessica Piper reported. Some of these funds would come from out-of-state drivers, especially heading into the summer.
A three-month state gas tax suspension would save the average Maine driver about $22. In Maine, deficient roads cost Bangor residents an average of $1,561 a year, according to a 2021 assessment by TRIP, a national traffic research safety group. These figures include the costs of vehicle repairs, congestion and safety issues.
Toll revenue accounts for nearly all of the funding for maintenance on the Maine Turnpike. The gas tax accounts for the largest share of state funding for Maine Department of Transportation projects. The department already has a roughly $230 million backlog of unfunded work, a shortfall that was exacerbated by the 2011 suspension of indexing gas tax to inflation, which was passed by the Legislature when LePage was governor.
Maria Fuentes, executive director of the Maine Better Transportation Association, said proposals to reduce or eliminate the gas tax, “mean well, but won’t work.”
The best way to reduce the impact of oil and gas price increases in the long term is to use less of these fossil fuels. That can’t happen overnight, but increased use of solar, wind and hydroelectric power are part of the solution. In the short term, increasing domestic production should be considered, although the U.S. is already the world’s largest oil and natural gas producer (and consumer) and a net exporter of petroleum. Companies also have thousands of unused leases on federal and Indigenous land, so corporations, and not just the government, are the ones to make decisions about increasing production in America.
“This past year [oil companies] have announced almost $40 billion of stock buybacks — which does nothing for production or anybody else except shareholders and perhaps the executives — and about $50 billion of dividends. That’s money that could have gone into investment for production,” U.S. Sen. Angus King said Thursday during a hearing of the Senate Energy and Natural Resources Committee.
“What’s hampering the growth of production isn’t federal policy and it isn’t scary statements from the White House about climate change,” King added. “It’s a failure to invest in the production capability.”
It is probably naive to think that energy companies will reduce their profits to help consumers when they fill up their gas tanks or heat their homes. But corporations sharing some of their huge profits makes more sense than cutting off state revenue needed to maintain our roads and other infrastructure.