October 19, 2022 |
Wyoming cannot do much in the short-term to provide relief to consumers from the big spike in the cost of gas and diesel they’ve had to endure at the pump this year. This was the finding of the final report out yesterday from the Governor’s Gas and Diesel Working Group.
Governor Mark Gordon assembled the group in June of this year from public and private sectors to find solutions for providing relief from $5 and $6-gallon gasoline.
The group’s 18-page report dated Oct. 18, 2022, does not offer consumers much hope. It begins by stating that three factors impact the prices of gas and diesel: Worldwide supply, refining capacity and unique regional considerations. The group states Wyoming has little control over any of the factors in the short term. Long-term solutions, such as increased refining capacity would take years and billions of dollars to achieve.
The group considered and abandoned several short-term solutions in the form of policy options. One was a Wyoming gas app, that would refund consumers directly if the cost of the pump exceeded a set price.
The rebate would be funded by diverting Wyoming severance taxes from oil prices higher than the CREG estimate—creating the potential for a state budget buster.
Another concern is that the app-based fuel subsidy would evolve into an entitlement program that would be difficult to unwind or expand beyond fuel into other goods, such as food.
Reducing the state fuel tax, or introducing fuel tax holidays, were also rejected as meaningless. The reductions wouldn’t save consumers much money, but they would impact highway construction and maintenance funding. In Wyoming, about one-third of benefits would go to out-of-state divers, most of whom cause most of the road damage with their big rigs. As a result, for every $10 the state would lose, Wyoming residents would only receive about $4.60 in benefits.
Tax holidays are even more inefficient, the group concluded.
The group also looked at removing a depression-era state law that prevents retailers from selling good for less than what they pay. The working group considered how consumers might benefit from lower prices because of increased competition among gas stations. The group ultimately concluded that repealing W.S. 40-4-107 would lead to anti-market consolidation and result in independent retailers going out of business.
Long-term solutions identified in the report include encouraging oil and gas production by reducing royalties on state lands. Another is hiking the tax on renewable diesel to encourage keeping that fuel in the region. The goup notes that Wyoming refineries have not increased their supply to replace the renewable diesel now refined by Holly Frontier Cheyenne (6,000 barrels per day) and H.F. Sinclair (10,000 barrels per day).
The legislature could also provide relief through sales tax reductions, but administrative burdens on retailers and potential state budget disruptions would pose a new set of challenges.
Bottom line: No easy answers exist to providing relief at the pump. The Governor thanked the group for its work and encouraged lawmakers to study the specific recommendations made in the report.
A copy of the report may be viewed here.
Meanwhile, rather than encourage and enable domestic oil production, President Biden this week announced the release of another 15 million barrels of oil from the nation’s strategic reserve ahead of the mid-term elections. More releases may be on the way—proving the point in yesterday’s report from the governor’s task force that increasing supply of oil does reduce the cost at the pump for consumers.
Click here to view the Governor’s Gas and Diesel Working Group Report
