Idaho Fuel Prices: Why Sky High?

by Senator Brent Hill

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The other day I received a letter from a young boy scout working on one of his citizenship merit badges. His blunt inquiry articulates a question we are all asking: “Why are Idaho’s gas prices higher than in most other states?”

I have asked that same question to fuel dealers, distributors, economists, and politicians. I have concluded that there is not one principal reason, but a combination of factors has driven the gas prices up in Idaho.

 

 The Quest for Profit

Service station operators as well as the distributors from which they buy their fuel all want to maximize their profits. They charge as much as we are willing to pay. In America’s free enterprise system, the government does not intervene to restrict the price a business charges its customers, except under two circumstances: (1) The government does prohibit “price fixing.” If any number of service stations agree to charge a certain price (fix the price), competition is eliminated and customers will pay more than the free market would otherwise require. However, a service station changing its prices in order to compete with the service station across the street does not constitute price fixing. There has to be an “agreement” to make it illegal. (2) “Price gouging” is also illegal. Fuel dealers are not allowed to charge excessive prices to take unfair advantage of a disaster or emergency. Beyond those two exceptions, service stations are free to charge whatever prices they want to.

No Refineries in Idaho

All of our neighboring states have proven crude oil reserves. Montana has four refineries, Wyoming five, Utah five, Colorado two, and Nevada one. They all produce and refine crude oil within their own state. Idaho, however, has no proven crude oil reserves, produces no crude oil, and has no refineries, so it has to depend upon imported fuel from other states. It costs money to transport the fuel to Idaho, either by pipeline or by tanker trucks. Those transport costs add additional cents to each gallon of gas sold in Idaho.

State Fuel Taxes

Every state charges a tax on fuel sold. This tax is shared with cities and counties to build and maintain roads within the state. Some states, like Wyoming, receive so much money from the severance tax they impose on the extraction of natural resources (such as oil, coal, or gas) that will be used in other states, that they can charge a lower fuel tax than Idaho must. This is how much we pay for state fuel taxes on each gallon of gas purchased in:
Idaho             25¢
Utah              24½¢
Montana         27¾¢
Wyoming        14¢
Colorado         22¢
Neveda           23¢

When we consider the number of miles of roads a large state like Idaho must maintain compared with a relative small population to pay for that maintenance, we can see why Idaho’s fuel tax is as high as it is. Even with our 25 cents per gallon fuel tax, Idaho is falling $240 million dollars short every year in funds to keep its roads and bridges properly repaired.

This is obviously a very complex issue and there is no simple answer. I am concerned that Idaho’s gas prices are a few cents higher than other states, but I am even more concerned about the overall soaring cost of fuel caused by our heavy dependence on foreign oil. It is important for the United States to establish a workable energy policy and find ways to produce more of its own oil and other energy needs. The current outrageous gas prices may be just the impetus we need to dislodge control over domestic oil exploration and production, nuclear power, and the expansion of hydro-electrical facilities from the fists of environmental extremists. Pain can be a great motivator for change.