High gas prices could be boon for state, not motorists

www.newsday.com By ALICIA CHANG Associated Press Writer

February 22, 2003, 2:02 PM EST ALBANY, N.Y. -- From Albany to Buffalo, motorists are feeling the unwelcome pinch in their wallets as gasoline prices at the pumps continue their spike in recent weeks. Motorists' loss could be New York's gain. The state could receive a surge in revenues if the cost of gas and diesel fuel maintains this trend because the state charges 4 percent sales tax on gas sales, or 8 cents a gallon if the average price of motor fuel reaches $2 a gallon. On a 10-gallon fill-up, that could be a tidy 80 cents for the state. Analysts blame the price hike on tensions in the Middle East and a strike in Venezuela that has crippled that nation's petroleum industry. This turmoil is potentially good news for New York state, which is struggling to plug an $11.5 billion hole in its budget over the next 13 months. Even without the price surge for most of this fiscal year, the state expects to raise more than $500 million from its motor fuel tax. But while prices at the gas pump might inject much-needed revenues into state coffers, the harsh winter New York is suffering through is increasing the cost to the state to heat its buildings. So far this winter, the state has spent $3.82 million alone to heat the state Capitol and the sprawling Empire State Plaza complex in Albany where 16,000 state employees report to work. That's an increase of more than 50 percent compared to the same period last year, when the state spent $2.13 million. "Because of the colder temperatures and the longer winter that we're experiencing, our costs this winter are higher because of the increased demand for fuel," said Jennifer Meicht of the Office of General Services. The state heats its buildings with a combination of oil and natural gas, depending on price and supply and demand. Last winter, the state used only gas, which is environmentally cleaner and cheaper, to heat buildings. This month, the state paid $1.12 a gallon for heating oil, up from 89 cents in October 2002. Last week, the U.S. Energy Department, citing low stocks _ as well as higher natural gas prices _ said heating bills could be 50 percent higher this year than last winter. If the cold winter persists, refiners will need to keep up the heating oil supply and postpone their push to making gasoline. If so, gasoline inventories may not recover, leading to higher gas prices this spring and summer, analysts said. Across New York, gas prices have reached record highs. In the Albany area, the average price for a gallon of regular, unleaded gas Saturday was $1.70, up from $1.16 a year ago, according to the American Automobile Association. In Buffalo, it was $1.74 a gallon, up from $1.17 a year ago. In New York City, it was $1.81 a gallon, up from $1.29 a year ago. The Pataki administration disputes that the state benefits from higher gas prices at the expense of motorists. Officials contend that drivers tend to purchase less gas as prices skyrocket, essentially offsetting a revenue surge when gas prices spike. Robert Sinclair Jr., a spokesman for the American Automobile Association of New York, disagreed. He said that contrary to popular belief, people don't buy less gas when prices are expensive but rather shop around or cut back on nonessential driving. "In the United States, we are tied to our vehicles so folks don't have a choice," Sinclair said. Under a special contract, the state, which maintains a fleet of 12,823 vehicles, currently pays 98 cents a gallon for gas compared with 66 cents a gallon a year ago, Meicht said. Of that fleet, 20 percent use alternative fuel such as electric and ethanol and are not subject to gas price fluctuations. It was not immediately clear how the soaring prices have affected the state's fleet, she said. During the last gas price hike in summer 2000, Republican Senate Majority Leader Joseph Bruno proposed to permanently repeal the motor fuel tax in order to give motorists a financial break while Democratic Assembly Speaker Sheldon Silver favored a two-month suspension of the gas tax. Neither proposal passed. Given the climate of the state's fiscal problems, it's unlikely any state leader will suggest giving back any surge it gets in gas tax revenues in 2003. Earlier this month, New York U.S. Sen. Charles Schumer asked the Federal Trade Commission to launch an investigation into the rising gas prices in order to determine whether there was evidence of price gouging.