Why are gas prices so high if gas taxes are now historically low?

RICHMOND, VA (WTVR) — Virginia re-formulated its gas tax laws under a historic transportation bill that passed the General Assembly, signed by Governor Bob McDonnell and took effect July 1.

In exchange for raising the sales tax, the gas tax was lowered about six cents a gallon.

But many people are asking why then did gas prices rise in Virginia by about fourteen cents?

“You can’t tell the taxes went down, the gas didn’t go down on July the first,” Robert Wilson, a Richmond driver said.

CBS 6 asked Mike O’Connor, the President and CEO of the Virginia Petroleum, Convenience and Grocery Association, whether gas station owners were taking advantage of lower taxes by charging higher rates.

“Absolutely not,” O’Connor said.

gasprices3O’Connor went on to say the reason gas prices are up is because the price of crude oil is up.He estimated that the price of crude oil contributes to 65% of the total cost of gasoline.

Taxes are estimated to be just 3.5%.

In essence, lower taxes don’t always guarantee lower gas prices.

“It’s because the crude oil has gone up so much the consumer has not seen any relief,”
O’Connor added.

And it could get worse for Virginia drivers in the months to come.

Under the new transportation law, taxes are re-calculated every six months based on the six month average. So if the July-December average is higher than the January-June average, gas taxes will increase next year.

gasprices2

Also, if Congress fails to pass the Marketplace Fairness Act – which would allow Virginia to more easily collect internet taxes – gas taxes would increase as well.

The average cost of a gallon of gas in Virginia is around $3.44 a gallon according to Gas Buddy.

Virginia’s price is lower than Washington DC, North Carolina, and Maryland.

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