Oil costs not only reason for high prices at the pump

By Don Heinzman, Guest Columnist

Four-dollar-a-gallon gasoline at the pump has become a political issue, but that’s not the real cost.

The price of every gallon of gasoline in Minnesota includes federal and state gas taxes of 46.4 cents.

This includes a state tax of 28 cents per gallon and a federal gas tax of 18.4 cents a gallon.

So, when you fill up your tank, subtract the 46 cents from the price and you have the actual price per gallon. To illustrate, the price of $3.85 minus the tax of 46 cents gives you an actual price of $3.39 per gallon. If you fill up your tank with 10 gallons of gasoline, you are paying gas taxes of $4.60.

It’s the U.S. Congress (most recently in 1997) and the Minnesota Legislature (most recently in 2008) who increase gas taxes, not the president of the United States.

The 18.4 cents per gallon goes to the Federal Treasury, presumably to build infrastructure.

At the state level, the 27.2 cents per gallon goes to the state where it must be used for building roads and bridges. (It’s important to note that the gas tax is not indexed to the price of a gallon of gasoline.)

Who gets the rest of what’s left?

According to the Minnesota Service Stations Association, the service station operator is lucky to make 12 cents on a gallon, but of that he must pay credit card fees of 8 cents, leaving profit of 4 cents a gallon.

The National Association of Convenience Stores reports that last year the service stations earned $6.9 billion while the credit cards from gas purchases earned $11.3 billion. It’s estimated that credit card sales for gasoline account for 75 – 80 percent.

In a recent study, the Department of Energy broke down how a dollar for gasoline is spent: taxes, 13 cents; distribution and marketing, 8 cents; refining, 14 cents and crude oil, 65 cents.

When you fill up again, remember that 46.4 cents of that gallon price is a tax you are paying to build roads and bridges, which is a worthwhile user tax expenditure.

 

Don Heinzman is a member of the ECM Editorial Board. ECM Publishers Inc. is the parent company of the Morrison County Record.

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