Lowering Gas Prices

Gas prices are ridiculously high, and we need to do something about it—both as a state and as a nation. While there is no silver bullet, I believe we can act to lower prices a little in the next few months, and quite a bit in the next few years. I believe there are three big ideas that will lower the price of energy: in the short term, we can cut the gas tax; in the medium term, we need to increase the supply of oil produced in the U.S.; and in the long term, we should find environmentally-friendly alternative energy sources to dramatically increase energy supply.

Short Term: Reduce Gas Taxes. Legislators took a step in the right direction when we voted recently to cancel the scheduled increase in the Petroleum Products Gross Receipts Tax - Connecticut’s hidden gas tax – and make it possible for gas station owners to offer cash discounts.

But state residents will be sorely disappointed when they realize that we did not reduce the amount of state taxes they pay every time they fill their gas tanks. The one short-term factor in the price of gas we as legislators can control is the gas tax. I believe we can lower it 10-20 cents per gallon without negatively impacting state finances.

Right now, Connecticut charges a 25 cents per-gallon excise tax on gasoline, plus a 7% per-gallon Petroleum Products Gross Receipts Tax, which is a tax levied on the average wholesale price. Without the General Assembly’s intervention, the Petroleum Gross Receipts Tax would have increased automatically to 7.5 % on July 1st.

The problem is that we did not actually reduce taxes. Because this tax is a percentage of the price, as the price goes up so does the tax! Thus, Connecticut has $94 million in excess funds from the gas tax that we did not budget for. We can afford to cut the gas tax by 10-20 cents and still have enough funds for our transportation needs. (The gas tax goes to fund road improvements and public transportation).

The Democratic majority in the General Assembly refused to allow my amendment to reduce the gas tax this month. I am hopeful that they will allow us to debate and vote on this proposal so we can provide immediate relief at the pump.

Medium Term: Increase Oil Supplies. While this is more a federal than a state issue, we need to increase the supply of oil (and natural gas) produced in the United States. Specifically, we need to find environmentally-friendly locations to drill for more oil and increase refinery capacity. While we do not want to drill for oil in environmentally sensitive areas, there are several large mid-ocean deposits of oil in Gulf of Mexico and other areas that could be tapped with minimal disruption to the environment.

More important, however, is increasing refining capacity. We could drill for all the raw oil we want, but we need to refine it into useable gasoline and home heating oil. However, we have not built a new refinery in this country in decades—squeezing our domestic oil supply. Our refinery capacity is so tight that when one of them goes out, it sends prices soaring. For instance, the current oil price explosion started when Hurricane Katrina knocked out refineries in the Gulf of Mexico, and gas first shot up to $3 per gallon. Again, while we need to take environmental factors into account in deciding where to build the refineries, the federal government must take action to increase domestic oil supply.

Long Term: Alternative Energy. Finally, in the long term Connecticut needs to explore alternative sources of energy that are both sustainable and environmentally friendly. While much of this technology is 5-10 years away from being practical, we need to diversify away from oil and natural gas. Connecticut can take a lead on this, given our concentration of universities and educated science and engineering workforce.

I believe the General Assembly needs to give tax credits to those exploring economically feasible options such as fuel cells, biodiesel, and tidal power. We need two types of tax credits here. First, we need tax credits for research and development of new technologies. Second (and more importantly) we need to have tax credits for consumers to adopt new technology. Often the barrier is getting the first wave of consumers to adopt new technology, and Connecticut should offer these incentives once technologies are proven.

By creating additional supply beyond oil and natural gas, we will not only lower the price of electricity but help solve some of our geopolitical problems as well.

So while there is no one simple solution to Connecticut’s out-of-control gas prices and energy costs, there are actions we can take. We need to provide short term relief through tax cuts, medium term fixes to increase oil and natural gas supply, and long term environmentally-friendly new sources of energy. My hope is that the General Assembly moves quickly on these proposals, and we can fix the energy problems that are hurting our families.

I welcome the opportunity to discuss important issues like this with my constituents. I will be holding office hours at the Huntington Branch Library in Shelton, meeting room three, from 6 p.m. to 7:30 p.m. on Monday, July 7th. I hope to see you there.