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You are here: Home / Business / Analyst says gas below one dollar not likely in Iowa

Analyst says gas below one dollar not likely in Iowa

March 1, 2016 By Dar Danielson

gas-pump-111A big drop in oil prices and a glut of gasoline on the market had some analysts predicting 99 cent-a-gallon gas would hit pumps across the country.

Iowa Agriculture Department fuels analyst, Harold Hommes, is not one of them. “I guess I don’t think I ever was of the school that we were going to see sub one dollar gas prices — even though there were a few places that it was getting fairly close to that around the country,” Hommes says.

Hommes was surprised prices in Iowa got as low as they did. “Frankly, the dollar-40 and 50 level that we saw here as little as two weeks ago, that was more than I had expected to see,” Hommes says. “It was a fairly precipitous fall, just slow and steady. We did have a bump in there when a BP refinery was taken down, one of its distillate units briefly, then things returned to normal.”

Gas prices moved back up the last couple of weeks as the supply glut cleared, and Hommes doesn’t expect another big drop back down. “I think that with what has already been put in place, as well as what’s still to come, the lows are in for the season,” Hommes says. Even if gas prices in Iowa began dropping again, Hommes says the 47.4 cents in taxes on each gallon make it tough to get below one dollar.

“It makes it almost virtually impossible when you look at the tax and to get it delivered from a local terminal,” Hommes says. There’s 18.4 cents in federal taxes added to each gallon of gasoline, and then around 29 in state taxes. Then you add in the transportation cost and profit for retailers.

“So, we would have to see gasoline less than 50 cents at wholesale, because you’ve still got to leave a little bit for retail margins. So, I just don’t think that was ever really in the cards in Iowa,” Hommes says. Iowa added an extra 10 cents to the state tax on gasoline last year.

 

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