Gas tax relief arrives in Dutchess as another surge in prices looms, experts say

A quarter isn’t a lot of money these days.

But, multiplied by a 12-gallon gas tank, and a quarter becomes three dollars.

Multiply that by a daily commute to work or a long car trip for vacation, and Mid Hudson Valley residents had something to celebrate Wednesday, even if the relief may be short-lived.

Wednesday brought the beginning not just of New York’s gas tax holiday, but also a local gas cap in Dutchess and Ulster counties.

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The savings equates to roughly 25 cents per gallon of regular locally, between 16 cents savings from the state and between eight and nine cents saved in county taxes, a number that appears poised to increase.

After the cost of a gallon averaged more than five dollars Tuesday, several stations around Dutchess Wednesday offered prices below $4.70.

Prices have been at record-high levels across the country, and experts believe they are poised to soar even higher.

Crude oil prices jumped to a more than two-month high after the European Union approved a plan to ban most Russian oil imports for its invasion of Ukraine, and China showed signs of easing its COVID-19 lockdowns — meaning even less oil will be available on the world market.

The latest round of sanctions will immediately affect 75% of Russian oil imports, and by year end, 90% of the Russian oil imported to Europe will be banned, Charles Michel, president of the European Council, tweeted on Monday.

Because oil makes up more than half the price of gasoline, consumers are likely to see gas prices break new record highs in the coming weeks.

“After several weeks of soaring gas prices, last week saw prices nationally slow down ahead of Memorial Day, but I’m afraid the good news ends there,” said Patrick De Haan, head of petroleum analysis at GasBuddy.

The gas tax holiday was proposed in New York earlier this year, when inflation and the war in Ukraine sent oil prices into the stratosphere, leading to statewide per-gallon prices of over $4 at the pump.

That seems like nothing compared to today’s prices — New York’s average price per gallon was $4.93 as of Wednesday morning, nearly 60 cents more than it was a month ago, and around 60% higher than last year at this time, when it was $3.08, according to AAA. The average in Dutchess County was even higher Wednesday, $5.02. Meanwhile, the national average was $4.62, up from $3.05 a year ago.

Some elected officials noted that it may take several days for the price adjustments to take effect for consumers, based on when retailers receive their next delivery, AAA said in a news release Tuesday.

In order to lessen the strain on New Yorkers’ wallets amid rising costs for other consumer goods, New York lawmakers proposed to ditch the state’s gas tax this year, which in total adds 48 cents to each gallon pumped by drivers. Other ideas included a summer suspension of New York State Thruway tolls.

How will the gas tax suspension work?

A version of the gas tax proposal passed in the state’s budget in April. It removes the state’s motor fuel and sales tax from June 1 to Dec. 31, cutting the cost for drivers by about 16 cents a gallon at New York gas stations.

Days later, Dutchess County passed its proposed tax cap, which changed the formula by which gas tax was collected from 3.75% per gallon to a flat amount of eight cents per gallon. According to the average price for a gallon of regular on Tuesday, that equated to more than eight cents per gallon of savings, and more for higher grades or fuel or as gas prices increase. The Dutchess cap expires Dec. 1.

Other counties, including Ulster, Westchester and Rockland soon followed.

The revenue lost by suspending the state's motor fuel and sales tax on gasoline, which amounts to $585 million over seven months, will come out of the state's general fund. A little more than 80% of the motor fuel tax portion, or about $292 million over that time, would go to the repair of highways and bridges while the remainder goes to mass transit subsidies.

The suspension will bring an estimated $600 million in savings to New Yorkers this year, Sen. John Mannion, D-Geddes, said Tuesday on Twitter.

"Rising gas prices hurt families and our economy and we are doing everything possible at the state level to lower costs," Mannion said last week at a media appearance with Assemblymember Pamela Hunter, D-Syracuse, where they highlighted the need for the cost-saving measure.

The statewide move to cut gas taxes met ire from climate groups, who said New York should be discouraging people to drive. Others worried about the financial damage to transit systems still struggling to emerge from pandemic-induced ridership slumps.

“This sets a dangerous precedent and opens the door to setting triggers for suspending this important revenue if gas prices go too high or raiding the revenue for other uses," said Lisa Daglian, executive director of the Permanent Citizens Advisory Committee, a commuter group, in April.

Assemblymember Angelo Santabarbara, D-Rotterdam, a major proponent of state gas tax legislation this year, pushed back, saying many communities, especially in upstate, are built for a driving populace and don’t have quality mass transit systems.

“The roads are our bloodlines,” Santabarbara said in April. “So, to say that we want to discourage people to drive means that people aren’t going to work, people aren’t going shopping, people aren’t going to visit their families.”

What’s next for gas prices?

Consumers should prepare for a “cruel summer,” with gas inventories at the lowest seasonal levels since 2019 as the summer driving season heats up, Natasha Kaneva, JPMorgan head of global commodities strategy, said last week. She predicted the national average for regular unleaded would climb to $6.20 per gallon by Labor Day.

Even before the EU’s announcement, analysts had already been warning that gas prices would remain elevated this year due to dwindling oil supplies and consumers’ seemingly insatiable desire to travel after two years of pandemic restrictions.

“Crude oil inventories are down to a dangerously low point” in Europe, North America and parts of Asia, Bank of America’s global commodities researchers said in late May.

This is happening just as spare production capacity from the Organization of the Petroleum Exporting Countries and 10 other oil-producing nations (collectively known as OPEC+) has fallen to the lowest levels since April 2020, they said. OPEC+ is slated to meet on Thursday to consider increasing production to replenish supplies more quickly, but analysts say that’s unlikely.

“We are assuming that OPEC+ will not deviate away from its current production policy of modest supply increases every month,” Warren Patterson, ING head of commodities, wrote in a commentary.

What’s more is that China looks to be loosening COVID-19 lockdowns in Shanghai, which could boost demand for oil at a time when stocks are low. That’s likely to keep adding upward pressure to oil and gas prices, analysts said.

Includes reporting from New York State team reporter Thomas Zambito. 

This article originally appeared on Poughkeepsie Journal: Gas tax holiday arrives in Dutchess; another surge in prices looms