A World Without Gasoline

A common theme through most of the convenience store conferences that I have been to this year is that the total amount of gasoline being sold in the United States is on the decline.  This doesn’t seem to be temporary trend but, rather, the harbinger of the future of gasoline retailing.

Analysts attribute the decline in gallons to a combination of things: more fuel efficient cars, alternative fuel cars, and fewer miles being driven.  All of these things mean that those of us who sell gasoline will have drivers visiting us less often to fill up their car.

Personally, I see this as a good thing.  Declining gasoline use combined with an increase in oil production in North America is ultimately going to be good for the economy (it should lead to more stable gasoline prices because there will be fewer foreign policy factors affecting production) and for national fuel security (the US will be less reliant on oil supplies from volatile places such as the Middle East, Venezuela, and Norway (just kidding!)).

A very interesting question is how is this going to affect state and federal tax revenues.  At the moment, every state and the federal government add a tax to each gallon of fuel sold.  Usually this revenue is used to build and maintain the country’s road and highway system.  Fewer gallons being sold means less tax revenue unless the tax rate is increased (something that seems unlikely in the current political environment).  Less tax revenue means deteriorating roads and bridges.  Bad roads will have a negative affect on commerce as the transport trucks take more time to deliver their goods causing retail prices to climb due to increased costs.

The aspect that makes this most interesting to me is that fewer gasoline gallons sold does not mean fewer miles driven or even fewer cars on the road.  With the introduction and (relative) popularity of gasoline/electric hybrid cars and other alternative fuel vehicles (electric cars, bio-mass fuels, and CNG fuel vehicles) there are still plenty of cars on the road.  But if they aren’t dependent on gasoline how will the government collect the taxes to maintain the roads?

Fuel taxes have been considered one of the most progressive taxes around – you only pay the tax when you use the item (gasoline) and take advantage of a resource (using the roads that are paid for by the taxes).  The more you use the roads in a gasoline powered car the more tax to you pay towards the maintenance of that road.  Pretty fair, right?

Well, those evil hybrid car owners are getting away with using the roads without paying their fair share of the upkeep.  And don’t even get me started on people who own 100% electric cars!

State governments are starting to realize that they’ve got a problem on their hands (or under their feet, as it were).  No one’s come up with a standard solution but the state of Oregon is doing a test to use GPS tracking devices installed in cars to determine how many miles the car travels.  The car owner will then be taxed on the number of miles driven.

Obviously, privacy is a huge issue here.  But other, smaller, questions come up.  Who pays the taxes if I loan my car to someone?  What happens if my car is being towed or transported on a truck? Will this type of taxation have a negative impact on fuel efficiencies since people are not being “penalized” on how much fuel that they use but how far they drive?  Will it keep people from buying more expensive fuel efficient cars?  Who collects the taxes if I drive across state lines?

I certainly don’t have any answers but a downward trend in fuel sales may have a big impact on how we move around.