The gas dealers like the transportation bill. They also warn of a possible gas shortage this summerPoliticsVirginia

While Shaun has covered some of the strong dislike for the transportation deal, surely someone outside of capitol square kind of likes the idea, right?

Well, yes (besides the assortment of road builders and various other tax consumers who will obviously benefit from the deal). Gasoline dealers like it too. From the Oil Price Information Service:

Marketers canvassed by OPIS expressed general pleasure with the outcome of the negotiations.

“It is a fair deal,” one Virginia wholesaler told OPIS. “I like it because at today’s prices it actually means lower pump prices for the Virginia consumer,” the marketer said.

Marketers also say the new tax structure doesn’t terribly harm the cash flow they gain from collecting the higher existing tax. What they are losing on gasoline, they are gaining back a bit on diesel fuel, since at current wholesale prices the diesel tax would be 20cts/gal not 17.5cts/gal.

The idea that this deal will lower pump prices — an early Administration talking point — is an open question. A rise in the wholesale price will, inevitably, be passed along both to dealers and consumers.

That does not mean all is well at the corner gas station. One concern is how long the new tax levels will be fixed. Another, more ominous, concern is what this may mean for gas supplies:

Another issue is some kind of inventory adjustment that takes into account station owners buying product and paying the higher tax but possibly being forced to sell that gasoline at retail once the new math tax takes effect. OPIS is told that the new tax structure is set to take effect July 1, 2013. Marketers point out that without some kind of inventory adjustment, the state of Virginia could face gasoline shortages in June.

“Practically speaking retailers would be reluctant to buy higher-taxed gallons in June knowing the tax rate will drop in July,” one marketer pointed out. “That could result in supply problems during a critical month when summer gasoline demand is on the rise.”

In other words, a summer gas shortage could be on the horizon. Not guaranteed to happen — the General Assembly could make the necessary tweaks to avoid the inventory and taxation issues.

But if it’s not addressed, at least you’ll know who to blame if “no gas” signs start popping up around the commonwealth a few months from now.

  • Loudoun Patriot

    Dont think it was an accident… Generally wholesalers love being tax collectors in the industry, frankly they fight for that status. Collecting taxes creates a constant fat cash flow in your accounts thats called a “float” in most industries. This is of course interest-bearing and also makes your bank really like you, which is a big benefit for these small and mid businesses that need borrowing power, etc.. States (not sure if Va does or not) also generally allow a “collection allowance” for businesses doing the work of collecting and remitting taxes, this can be substantial, as well, when dealing with big dollars. The petroleum marketers are a good group, glad they got this.