Gas Prices

March 22, 2000

Just about everyone has noticed gas prices have been rising. But not everybody knows why prices have been rising. Lots of people have been blaming production cutbacks by Arab nations. Others point to a refusal to drill for more oil in America due to a fear of environmental backlash. But there is another reason for high prices: taxes.

The pre-tax price of gasoline at the pump has actually declined slightly in the last decade from 88 cents per gallon to 86 cents (as of last November). So the real increase in the price of gasoline during that decade was due to taxes: 27 cents in 1990 to 43 cents today.

Just one of those tax increases came with the 1993 Omnibus Budget Reconciliation Act which created a 4.3 cent-per-gallon fuel surtax. This hidden tax increase was supposedly for "deficit reduction." We are now running a federal budget surplus, so you would think that this tax would be removed. If you think that, you would be wrong.

Some commentators are calling for a reduction in the gas taxes. Reducing these taxes to the Highway Trust Fund would not adversely affect transportation nor would it consume funds set aside for Social Security. But the issue may be too hot for this session of Congress to handle.

So the only other solution would be to bring pressure on Arab states. Energy Secretary Bill Richardson has tried to increase production, but has met with resistance from nations eager to get $30 a barrel. And American companies seem to be enjoying their increased profits.

So gas prices go higher. But donít forget how much of a gallon of gas goes for production and distribution and how much goes for taxes. The real increase in gas prices over the last decade came from taxes, while the recent increase came from price gouging.

Iím Kerby Anderson of Probe Ministries, and thatís my opinion.