Soaring gas prices are having an unintended benefit – more money for Connecticut’s roads and bridges.
The state expects to collect millions more in wholesale oil taxes due to rising prices, but the windfall could be short-lived.
“IT’S TERRIBLE”
At gas stations, drivers are scrambling to fill up before prices go up.
“Terrible. It’s terrible,” said William Cong, a driver from Massachusetts.
Crude oil prices jumped 10% on Thursday – hitting $114 a barrel at one point – after President Donald Trump threatened to hit Iran “extremely hard” in a televised address. Iran has closed off the critical Strait of Hormuz to most oil tankers, putting a squeeze on global supply.
While drivers are paying more, higher fuel prices are also giving a boost to the state’s Connecticut's Special Transportation Fund. The state expects to collect an extra $15 million from wholesale oil taxes, according to the Office of Fiscal Analysis.
Companies that deliver fuel pay the 8.81% tax, but many pass it along to drivers and home heating oil customers.
“The state of Connecticut is getting a windfall because of the war,” said Chris Herb, president and CEO of the Connecticut Energy Marketers Association. “As it stands now, the state is making more per gallon on gasoline than most of our members.”
There is some good news.
Connecticut only taxes the first $3 of wholesale fuel, so even if crude oil keeps spiking, suppliers won’t pay any more than they are now.
“From a positive viewpoint, you’ll be able to put more money into the infrastructure. From the negative viewpoint, it's obviously hurting our consumers, our businesses,” said Mark Boughton, commissioner of the Connecticut Department of Revenue Services. “But remember, we don’t have tolls in Connecticut and that was the whole impetus for this system – that you would get rid of the tolls and we would have this higher gas tax that you’d pay. Otherwise, you’d end up paying a gas tax and tolls, which you do in some states.”
DEMAND STILL HIGH
Despite the high prices, OFA is not projecting a drop in gas sales yet.
“Just have to try to get adjusted to the pricing,” said Norwalk driver Chris Segura. “It’s a little bit difficult because I have my mom who's sick and I have to take her to a lot of doctors appointments.”
If prices continue to rise though, drivers could cut back – which would mean less money for roads because the state also charges a 25 cent-per-gallon gas tax at the pump.
“People are absorbing the higher prices in their household budget. Eventually, that catches up with you,” Boughton said. “So eventually, you’re not going to be able to buy the clothes for school and you're not going to be able to go on that vacation.”
“If you put a gas tax holiday on the board, would it pass? Yes,” said Connecticut House Speaker Matt Ritter (D-Hartford). “It’s a $40 million monthly hit. Then the question is, how long can you continue to do it? And then, what impact does it have on revenue that might prohibit us from doing more targeted credits and cuts to Connecticut taxpayers?”