The Maryland General Assembly and Gov. Larry Hogan approved a 30-day pause in the state gas tax Friday to help consumers cope with prices that recently surged to an all-time high.
How much that might translate into relief at the pump was expected to become clear this weekend, if not on Friday.
The state doesn’t have the power to dictate gas prices, which remain subject to global supply and demand pressures and the discretion of gas station owners. But Comptroller Peter Franchot, whose office regulates gas stations, suggested the retailers are likely to pass on the savings, and that his office could press them to if not.
State leaders said they hope prices drop quickly, but questions about how the policy will affect motorists remain. Here are some of those questions, and some answers:
How much is the state gas tax?
It’s slightly more than 36 cents a gallon, and is actually paid by the gas distributors who fill tankers with as much as 9,000 gallons at a time from a pipeline and then deliver the fuel to gas stations. Distributors pass the tax burden along to the stations, who then pass it on to motorists.
When will the gas tax holiday begin and end?
The legislation took effect immediately upon Hogan’s signature, and lasts until 11:59 p.m. April 16.
When could it translate into lower gas prices for drivers?
It could happen almost immediately at some stations, but may take a little longer at others — “as soon as implementation can occur, hopefully within the next 24 hours,” Senate President Bill Ferguson, a Baltimore Democrat, said when the bill passed that chamber Friday morning.
Putting the bill into action requires gas stations to measure their inventories of fuel and submit that to the state comptroller’s office so they can be refunded for any tax paid on that supply.
As the General Assembly debated the gas holiday, the fuel industry had said such a step would help them afford to quickly make any price cuts. Otherwise, many would have waited until they sold out of their stores of taxed gas before lowering prices.
How much could prices change?
One major gas station trade association and the comptroller’s office both suggested stations will largely drop their prices by the full 36-cent tax cut.
“I haven’t talked to one that wasn’t going to,” said Kirk McCauley, director of member and government relations for the Washington, Maryland, Delaware Service Station and Automotive Repair Association.
Legislative language makes clear the intent of the bill is that the tax holiday “shall be reflected in sales to consumers.” But the state lacks the power to dictate gas prices.
Franchot suggested that if gas stations do not reflect the tax holiday in their prices, his office could threaten their licenses, but it was not immediately clear under what legal authority that was possible.
Specific price drops from station to station could vary. Different brands of gas stations, as well as independent gas stations, all have varying calculations that go into their prices on any given day, McCauley said.
Competition could help prices decline. If one station chooses to pass much or all of the 36-cent tax break on to motorists, then for another station across the street, “that puts a lot of pressure on them real quick,” McCauley said. “They might have no choice.”
Gas prices have already dropped steadily in recent days, from a March 11 peak of $4.31 for a gallon of regular gas to $4.17 on Friday. Nationally, prices averaged $4.27 Friday, down from a recent high of $4.33.
But McCauley said prices jumped 20 cents a gallon Friday at the distribution terminal from which fuel is collected for delivery to gas stations, suggesting more price turbulence could be ahead.
Why are gas prices so high?
The price of crude oil has risen over the past year as driving and travel have rebounded from a pandemic-induced slump. Oil and gas suppliers that had scaled back production during the pandemic lull in demand are struggling to keep up. The OPEC+ oil cartel, led by Saudi Arabia and Russia, has only modestly increased the oil supply released to the market, keeping prices high.
The cost of crude oil is the main driver behind gas prices, with taxes, transportation costs and refining costs also factors.
Prices took a steeper climb when Russia, a major oil supplier, invaded Ukraine. Many buyers have shunned Russian crude oil as a result, reducing the worldwide supply of oil that people are willing to buy.
There has been no dip in U.S. oil production to help explain the price increases. The U.S. was producing 11.185 million barrels of crude oil per day in 2021, compared with an average of 11.283 million barrels per day in 2020, according to data from the U.S. Energy Information Administration. The latest data shows that for the week of March 4, 2022, the U.S. was producing 11.6 million barrels per day.
Maryland Policy & Politics
It’s also worth noting that while average gas prices are at an all-time high in the U.S., this is not the most Americans have paid for fuel, when adjusting for inflation. The previous record high of $4.10 a gallon in July 2008 would equal about $5.24 in today’s dollars.
What else could bring relief for motorists?
Proposals for a federal gas tax holiday — the U.S. collects 18 cents per gallon — had been moving slowly in Congress before Russia invaded Ukraine but gained momentum this month. The governors of Colorado, Michigan, Minnesota, New Mexico, Pennsylvania and Wisconsin have asked congressional leaders to suspend the national 18.4-cent-a-gallon gas tax through the end of the year.
Adding to that pressure, or perhaps easing it, a number of states besides Maryland have considered holidays on their own gas taxes.
Georgia Gov. Brian Kemp also was expected to sign a law Friday suspending that state’s gas tax through May 31. Gov. Glenn Youngkin this week proposed a three-month gas tax holiday in Virginia. Michigan lawmakers approved a six-month gas tax holiday Tuesday, but Gov. Gretchen Whitmer has signaled she will veto it. And lawmakers in Connecticut and Mississippi are considering similarly lengthy gas tax holidays.
Florida recently approved a gas tax holiday that is scheduled for October.
In Maryland, fuel tax rates are tied to inflation, which has surged to its highest levels since the 1980s. Republicans in Annapolis, who are outnumbered about 2-to-1 by Democrats, have proposed pausing those increases, based on the Consumer Price Index, or decoupling the state tax rate from inflation, but those efforts have all failed.
The Associated Press contributed to this article.