AASHTO Journal, 23 January 2015
The nation’s average retail price for gasoline could soon be under $2 a gallon, as the U.S. Energy Information Administration pegged it just below $2.07 as of Jan. 19 and pump prices continued to ebb afterward.
Already, the plunge in gas prices added billions of dollars in household disposable income in late 2014, and the EIA recently projected a further average household savings in 2015 of $750. The EIA said Jan. 19 retail gas prices were down more than 7 cents just in the latest week and were $1.23 below the year-earlier level.
The savings to the broader economy could be just starting, however, since diesel fuel prices are also falling for freight-hauling trucks, along with related fuel for locomotives and towboats used by the barge industry.
Those operators usually assess fuel surcharges tied to the EIA’s on-highway diesel figures, and so the falling cost of diesel will in turn bring down freight bills on a huge array of goods as those surcharges adjust downward.
The EIA said the national average diesel price for its Jan. 19 survey of fueling stations was $2.93, 12 cents lower than a week earlier and 94 cents a gallon below the same point in 2014.
The steady fuel price drop poses challenges to some state governments, including those that generate income from oil sales royalties or severance taxes and a number that have adopted percentage-based fuel taxes for at least part of their transportation funding stream.
For instance, oil-rich Alaska is having to tighten its state budget as the cost of oil declines and shrinks state revenue, and has put some big-ticket highway or bridge projects on hold.
The Kentucky Transportation Cabinet had already seen its 2015 fuel tax revenue shrink starting Jan. 1 as the first major quarterly decline took hold from its percentage excise tax. Now, it is facing another potential hit to its funding stream starting April 1 unless the legislature changes state law to lock in a price floor.
Kansas, which is already cutting a wide range of budget accounts including transportation and transferring fuel tax receipts to general funds to help close a budget shortfall, could also see its oil severance tax income shrink from a current $89 million level that is based on oil at $80 a barrel. The per-barrel price is nearly half that now.