Taxes, Not Gulf War, Are Boosting Gasoline Prices

If it seems like you are still paying too much to gas up the car these days, you can blame Uncle Sam instead of Saddam Hussein.

A gallon of gasoline now costs about the same as before Iraq invaded Kuwait--not counting about 5.6 cents in taxes added to the cost of a gallon of gas since the Aug. 2 invasion.

The average retail price of a gallon of self-serve unleaded regular on Tuesday was $1.135, according to a weekly survey by the American Automobile Assn.

That is 6 cents a gallon higher than the day before Iraq invaded Kuwait, when gas cost $1.075.

But since the invasion, higher federal and state taxes have added about 5.6 cents to the price.

“We’re pretty much where we were prior to the invasion,” said Mike Doyle of Computer Petroleum Corp. in St. Paul, Minn., which tallies fuel prices for AAA and others. “I guess in the coming week or two, you’re still going to see some downward pressure on retail prices. Not a lot, but a little bit.”

Prices have been falling since the war against Iraq began Jan. 17. The AAA survey indicated that gasoline prices have come down 25.2 cents a gallon since peaking during the Persian Gulf crisis at $1.387 per gallon in a survey on Dec. 4.

Minus taxes, Doyle said, the gasoline pump price is 3.8 cents cheaper than it was two weeks before the invasion. Thus, the “war premium” that sent oil prices soaring has vanished, leaving gasoline prices propped up mostly by more taxation.

The biggest bite came on Dec. 1, when the federal government imposed an additional 5.1-cent levy on each gallon of gas as part of a package of higher taxes intended to reduce the budget deficit.

Some state taxes have also taken effect recently. Doyle estimates that they have added an average 0.5 cent to a gallon between September and January.

His numbers put the total cost of new taxes at about 5.6 cents a gallon. But at least one oil company official said the additional tax burden is probably closer to 5.8 cents a gallon, when one accounts for gasoline tax hikes in huge states, such as California, that have big shares of the gasoline market.

Gas Prices Retail price per gallon for self-serve regular unleaded gasoline. January: $1.267 Febuary: $1.135