Bill would jack diesel prices, cut big truck costs

Got a diesel loving RV or tow vehicle? Hold on to your wallets, Congress is in session. A bipartisan proposal floated in Washington would jack the tax on diesel by six cents, while cutting taxes on big commercial trucks.

Representatives Jim Gelach (R-Penn) and Earl Blumenauer (D-Ore) have sponsored a bill that would tack on an additional 6.3 cents in federal road taxes for each gallon of diesel sold. On the other side of the bill, when trucking firms would see a 12 percent federal excise tax go away. Not surprisingly, American trucking interests are lauding the bill.

Quoted in a story by TruckNews.com, trucking industry representative Bill Graves says, "The proposal by Congressmen Gerlach and Blumenauer would not only reinforce the ailing Highway Trust Fund, but would provide a boost to US manufacturing and speed adoption of environmentally friendly technologies. It is exactly the kind of pro-growth, deficit-trimming legislation that lawmakers should be looking at as they seek to address our nation’s economic woes."

While American trucking firms may think the measure a good trade-off, others aren't so keen. Canadian trucking firms would see the price hike in fuel but no payoff in excise tax. And of course, recreational vehicle users will see no cut in their taxes either.

In simple math, a typical motorhome owner who gets eight-mile-per-gallon and puts 7,000 miles on his odometer will pay $55 more for his road tripping. On the other hand. the average truck purchase would see a cost saving of $15,000 if the bill passes.

What's behind the jump in gas prices?

A frequent argument made for the cause of high pump prices is the old, "supply and demand." If Americans are soaking up motor fuel than it can be produced, they'll be punished with higher costs. Are we receiving the "full recompense due for our error" of driving too much? Far from it says a story carried by Bloomberg Business Week. If anything, American's are using far less fuel than in times past, and yet the pump prices are still shooting up. What's the deal?

The US Energy Department confirms your fears: Gas prices are up 8% this year, the steepest hikes for so early in the year. If fuel prices keep up at this pace, it's possible $4 per gallon gas could be a pump reality by May or earlier. We haven't seen prices like that since the nasty summer of 2008, when this writer paid $4.99 for a gallon of diesel at a wide-spot-in-the-road in Nevada.

But fuel consumption is actually down, lower than any time in 15 years. So supply and demand charges are bogus. Bloomberg observes people are scratching their heads in wonder. The site quotes Tom Kloza, the chief oil analyst for the Oil Price Information Service who says speculators trying to cash in on fear are to blame. "We’ve seen about $11 billion of speculative money come in on the long side of gas futures," he says. "Each of the last three weeks we’ve seen a record net long position being taken."

Is it greed? We'll let you make your own conclusions. But adding to the price jacking misery is oft-cited refinery production hitch issue. Refineries are complaining that their profit margins are in the squeeze, paying a lot for crude oil, but not getting much for their completed product. Rather than "operate at a loss," some refineries are cutting down on production or shutting down entirely. Result, higher pump prices.

But gas prices aren't jumping everywhere. Up in Wyoming, says Bloomberg, the average price for gasoline is just $2.90. Contrast this to western Arizona where Quartzsite RV watchers have marveled at a runup on pump prices of over twenty cents in just two weeks. Hold on for the ride.

source: bloomberg business week