Gas Facts

Gas Facts

There is nothing better than putting the facts on the table to clear up issues. We are providing information that will help answer gasoline questions. Also included are our costs, taxes and selling prices for a gallon of gasoline. Retailers seldom divulge that type of information. We thought you would like to know. This is a rather lengthy document, however, we believe you will find the information provided interesting and informative.

Do you remember the politicians predicting $2.00 per gallon of gasoline in the 1973 and 1979 energy crunches? It looks like they might have been right, but off in their predictions by 25 years or so. The same crowd was predicting $3.00 per gallon of gasoline in the summer of 2001. We believed the $3.00 per gallon predictions would be as far off in accuracy as the rhetoric in the 70’s. (Note: As it turns out the politicians were wrong again.)

There is another important point that should not be overlooked regarding fuel distribution. The government took on the job of micro-managing fuel distribution in the 70’s. The result was lines, shortages, and other disruptions. Currently, the government has remained out of the fuel micromanagement business. We agree that prices are up, but things are going smoothly with few disruptions.

The highest prices and incidence of fuel supply problems seem to be in Illinois. We are one of few states that collects sales tax on gasoline which goes up with the retail price of gasoline. In addition, cities and counties levy taxes on gasoline, a practice not allowed in any surrounding states and very few other states.

See our links to sites with information on ethanol. Illinois is the largest producer of ethanol in the USA. If we listen to ethanol advocates, and ethanol is to be the great savior from all of those nasty oil companies, we should have no problem with fuel supplies. Hmmmmmm, something just doesn’t seem to be right.

Download this pdf and check out our flow chart describing the process of getting ethanol in your tank. You can arrive at your own conclusion regarding the claims that ethanol is a viable form of alternative energy.

Illinois Sales Tax History

The state sales tax on gasoline is back for the year 2001. We will leave the comments in the next two paragraphs intact even though they no longer apply. Keep in mind that the tax reduction information is history. At the end of the tax reduction, our governor stated that it made no difference in Twinkie sales. He was probably right. The hard place to market gasoline is along our state borders. Two things are worthy of consideration. No gasoline marketer is going to build a location near the border of our state-based upon a six-month sales tax reduction. Second, Illinois has had a reputation for years of having some of the highest gasoline prices in the country. If the state were to eliminate all gasoline taxes it would take time to alter that perception. Ask any trucker doing business in states outside of Illinois. So, the tax is back and it’s business as usual in Illinois.

Effective July 1, 2003, the State of Illinois increases the sales tax rate on gasohol. Previously 70% of the sales of gasohol were subject to sales tax. As of July 1, 2003, 80% of sales of gasohol are subject to sales tax. Effectively this reduces the state subsidy for gasohol by 33%. It means effectively that the tax on gasohol increases by about a penny per gallon. This will make gasohol less attractive as a fuel additive. Ethanol is present in gasoline only because of tax breaks such as this sales tax subsidy.

Effective July 1, 2000, the State of Illinois has temporarily reduced the state sales tax by 5 percentage points. This reduction is in effect until 12/31/00. In Peoria, the total sales tax is 7.5% and is reduced to 2.5%. For those selling fuel with ethanol, the old rate was 5.25% and the new rate will be 1.75%. There are concerns that the tax will not be passed on. The market will drive the price down just as it works in any other state already without sales taxes on gasoline. This includes most states and all of the states surrounding Illinois including Indiana also suspended their sales tax on gasoline.

The issue of rescinding sales tax on gasoline is not new. Many have pushed for this over the past several years because the total taxes in Illinois have caused many motorists to go to bordering states for fuel purchases. See the table below for taxes in surrounding states. Our bets are that the tax break would not have happened in a nonelection year. Remember Governor Ryan’s statement that a sales tax reduction would not make any difference. It is also interesting that the sales tax reduction is taking effect as gasoline prices are dropping. However, we’ll take any tax or price reduction. From a motorist’s perspective, the sales tax will go down 5.3¢ per gallon based on 6/30/00 prices. Our crystal ball guess is a reduction of 6-10¢ on Saturday 7/1/00. What happened as of Monday 7/3/00? Average street prices were down 6-7¢ on Saturday 7/1/00 which was followed by another round of price decreases on Monday 7/3/00. So much for all of the politician’s fear that the tax saving would not be passed on. It seems to us that any cost saving in government or excessive taxation is kept and called a surplus. The free market works well.

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