Friday, April 12, 2024

Gas tax to increase Jan. 1, average price at the pump forecasted lower in 2023

Gas prices are forecast to be lower in 2023, even though the gas tax rate is increasing Jan. 1. (Port City Daily/Amy Passaretti)

Following a year of tumultuous gas prices, drivers can expect a little relief in 2023.

Even though the motor fuels tax rate in North Carolina will increase by 2 cents, gas prices are estimated to average about 50 cents lower than they were this year.

READ MORE: Move over Wawa: Two Sheetz locations coming to the Cape Fear

Starting Jan. 1, the gas tax will rise from 39.5 cents to 40.5 cents per gallon, according to the North Carolina Department of Revenue. It makes North Carolina the state with the 13th highest gas tax, just above the U.S. average. The highest is California and the lowest is Alaska.

The tax amount is calculated based on a formula that takes the state’s population and the preceding year’s tax rate into account. It’s set by state lawmakers on an annual basis, since it was enacted in 1921, and assesses a flat rate rather than a percentage of sales, North Carolina Department of Transportation spokesperson Aaron Moody said.

As of 2021 a statutory change to the tax prohibits the rate from dropping below 0.36 cents.

The tax rate is multiplied by the percentage change in population, multiplied by 75%. It also takes into account the percentage change of the Consumer Price Index for energy costs, multiplied by 25%. Another 0.0025 cents per gallon inspection tax is levied for every gallon. 

The money collected from the gas tax in the Tar Heel state goes toward highway maintenance and operations (about 75% of the funds) and transportation infrastructure projects. About 50% of North Carolina Department of Transportation’s operating budget is dependent on its revenue for the state’s long-term transportation plan. The gas tax contributed more than $1.9 billion in fiscal year 2020 to NCDOT multimodal projects.

The remaining funds come from DMV fees and highway use tax on vehicle title transfers.

“Adjustments to the tax rate are considered as NCDOT’s planning and programming unit forecasts and updates funding projections for the department’s long range capital plan,” Moody said.

As of April, NCDOT reported a motor fuel tax revenue of $191.8 million, up from $179.6 million in April 2021. There’s been a 75% increase in tax collection from 2017 to 2022.

According to GasBuddy — a tech company that tracks fuel prices at more than 140,000 gas stations in the U.S. and Canada — when gas taxes go up, so do gas prices because the cost is included in what drivers pay at the pump. Price volatility comes from a variety of sources, including the time of the year (prices tend to spike in summer months), federal regulations, the strength of global economies, crude oil prices, supply and demand, refinery logistics, weather and more.

An average driver pays approximately $200 annually in gas taxes, or $3.80 weekly. One person’s contribution supports the patching of one pot hole, according to NCDOT. It estimates the average state driver travels 12,000 miles annually in a vehicle that burns one gallon of motor fuel every 22 miles.

GasBuddy projects the average price of a gallon of regular gas across all 12 months in 2023 will be $3.49. Throughout 2022, gas prices averaged $3.99 per gallon nationwide.

State experts say gas prices should remain a little more consistent next year versus 2022 where they averaged $3 per gallon in January and topped out at a new record-high of more than $5 per gallon in June.

Prior, the highest recorded prices of gas in North Carolina, according to AAA, date back to September 2008, with an average of $4.08 per gallon. For fiscal year 2020-2021, 6.5 billion gallons of gas were sold, a 5.5% increase from the prior year.

The spike in 2022’s pricing began in February when Russia invaded Ukraine. Forbes reported in May 2022 the war caused the cost of crude oil to increase nearly 60% from the prior year. Though the U.S. only gets about 3.5% of its oil from Russia, the country is one of the top oil-producing countries. Russia supplies about 12% of the global supply. Cutting off its resources impacts supply and demand, according to a report by NPR.

When the U.S. sanctioned Russian imports following the invasion, many investors pulled out of the Russian energy sector, according to the U.S. Department of Defense, all impacting the final price at the pump.

Also in October, the Organization of the Petroleum Exporting Countries announced it would be reducing oil production by two million barrels per day, further exacerbating the economic uncertainty of gas prices.

According to GasBuddy’s 2023 Fuel Outlook, Americans are expected to spend about $471 billion on gas next year, down $55 billion from 2022. The average household will total $2,471, down $277.

The next highest average annual household spending was seen in 2012 at $2,683.

The cost to fill up at the pump will average about $2.99 in February, the lowest for the year, with a jump to the $4 range in June. GasBuddy forecasts the summer months will see a dip in July and a rise again in August before falling throughout the fall and winter.

“2023 is not going to be a cakewalk for motorists. It could be expensive,” Head of Petroleum Analysis Patrick De Haan said in GasBuddy’s 2023 forecast. “Basically, curveballs are coming from every direction. Extreme amounts of volatility remain possible but should become slightly more muted in the year ahead.”

Tips or comments? Email

Want to read more from PCD? Subscribe now and then sign up for our morning newsletter, Wilmington Wire, and get the headlines delivered to your inbox every morning.

Related Articles