State tax will raise price of gasoline

Washington state drivers will see a jump in the already high cost of gasoline beginning next month.

After near-record gas prices in May, a scheduled state fuel tax increase will raise the cost per gallon by an additional 2 cents beginning July 1. Nationally, prices at the pump have been coming down slightly in the past few weeks.

The Washington tax will go from 34 cents to 36 cents a gallon, as mandated by a transportation package that funds 270 road and ferry improvement projects across the state. The tax will increase another 1.5 cents in July 2008, the final in a four-year series of hikes totaling 9.5 cents. The Legislature approved the increase in 2005, on the heels of a 5-cent jump in 2003.

The tax increase means Spokane-area drivers will have another reason to fuel up across the state line in Idaho. On Monday, prices were averaging $3.068 a gallon of regular unleaded gas in Coeur d’Alene, more than 15 cents less per gallon than Spokane’s $3.222, according to AAA. The national average was $3.081.

But automobile association spokesman Dave Overstreet said heading to Idaho to pump gas probably isn’t a great solution.

“It’s not realistic,” he said. “It doesn’t make any sense with the price of gas being as high as it is to drive very far to fill up.”

According to the American Petroleum Institute, an industry trade association, Washington’s soon-to-rise gas tax is sixth-highest in the nation. Idaho’s tax, at 25 cents a gallon since 1996, is slightly below the national average of 27.4 cents, according to API.

Like all other states, Washington and Idaho use their respective fuel taxes for highway funding. And, like drivers across the country, motorists in both states pay an 18.4-cents-a-gallon federal gas tax, which has not risen since 1993.

But differing state gas tax rates aren’t the only reason for the price disparity between Idaho and Washington. Oil companies’ pricing strategies contribute to the difference.

The two regions get their gasoline from the same sources – piped from Utah and Montana and barged up the Columbia River from Puget Sound refineries, according to Tim Hamilton, executive director of Automotive United Trades Association. Area distributors can access the pipeline that runs through Spokane, North Idaho and Montana at different points, with differing costs, said Hamilton, whose Olympia-based nonprofit represents independent gasoline retailers in Washington.

The wholesale price of gas at those access points increases heading west from refineries in Billings to the pipeline’s end in Moses Lake, Wash., Hamilton said. That means distributors in Idaho can buy gas for less than those in Spokane – and savings eventually get passed along to consumers.

The price difference between gas retailers in the two states may be further exaggerated because consumers who live close to the state line – or commute over it – will choose to pump their gas in Idaho, Hamilton said. That means retailers in Washington have to charge higher prices to make up for decreased sales volume.

“Washington dealers are forced to increase their margins to cover the loss of business from the transfer of sales from one side of the state line to the other,” he said, noting that an increased retail margin can add from 1.5 cents to 5 cents to the cost per gallon.

“We call that a ‘death spiral’ in the gasoline business,” Hamilton said.