Tags: Gasoline | Prices | Oil | Tax | Hike

Gasoline Prices May Skyrocket Amid Oil Tax Hike

By Dan Weil   |   Thursday, 27 May 2010 01:06 PM

Democratic Senate and House leaders have agreed on a 300 percent increase in the oil excise tax, to 32 cents a barrel from 8 cents now.

The hike is as part of the tax and spending bill likely to be approved this week. So you can expect gasoline prices to rise down the road.

The tax pays for the Oil Spill Liability Trust Fund, which now totals about $1.6 billion. The fund will likely be decimated by the economic damages arising from the BP oil spill.

The new rate would be effective in the first quarter that begins 60 days after the bill is enacted, which could mean this October. It would last through the end of 2020.

The tax increase, which was included as part of a broader package that also extends jobless benefits, would be effective through the end of 2020.

Republicans will almost certainly oppose the move. But given Democrats’ overwhelming majority in both houses of Congress, the change will likely go through.

Ironically, some oil industry executives actually want a tax increase, hoping it will forestall efforts to raise the liability cap on companies responsible for offshore disasters.

As for gasoline prices, the recent 20 percent drop in crude oil provides a positive note for consumers near-term.

"We expect retail gasoline prices to fall even as Memorial Day approaches," Tancred Lidderdale, a senior economist at the federal Energy Information Administration, told Dow Jones.

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Democratic Senate and House leaders have agreed on a 300 percent increase in the oil excise tax, to 32 cents a barrel from 8 cents now. The hike is as part of the tax and spending bill likely to be approved this week. So you can expect gasoline prices to rise down the...
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