You Asked: What Can The State Do About Gas Prices?

Is there anything that state lawmakers can be doing in Massachusetts to bring the price of gas a little bit back down?

If you buy a gallon of gasoline anywhere in the United States, part of the price per gallon is for the federal, state, and sometimes even local excise taxes.  The national average for those taxes is 49.5 cents per gallon, while in Massachusetts the total per gallon comes to 41.9 cents.  This figure is made up of the federal per gallon excise of 18.4 cents; the state’s 21 cents per gallon gas tax; and the state’s 2.5 cents per gallon underground storage tank (UST) fee which is used to cover the costs of leaking or ruptured underground storage tanks and gas station fuel spills.

In effect, the only thing we could do to reduce the price per gallon would be to reduce or eliminate the state gas tax and UST fee—at maximum reducing the price by 23.5 cents per gallon.  In the past, during times of rapid price escalation, my colleagues and I have proposed a temporary suspension to do just that. 

To provide some context, the state spends well more than the 21 cents per gallon on road and transportation maintenance and improvement efforts annually. As such, it is unlikely this tax will or could be reduced on any permanent basis. In fact, most of the debate on the gas tax centers around whether it should be increased.  The UST fee generates about $75 million per year, though only about $30 million of this is then sent back to gas stations for clean-ups.  The remainder is used in the state’s General Fund to support the state budget. So, this fee could be reduced to actual costs incurred, but the savings would only amount to about 1.5 cents per gallon.

While the law of supply and demand could reduce the costs of gasoline, that law is not as applicable to gasoline as perhaps most other commodities. Increased utilization of public transportation and car pooling can reduce the demand for fuel, but so much of the price is determined by factors beyond our state’s control that the price impact is minimal.