Consumer Alert: The gas price went down in Rochester after the gas tax holiday ended.  Here’s why

ROCHESTER, N.Y. – Today’s consumer alert is all about the price at the pump.  And at $4.47 a gallon, it’s down a penny in Rochester from last week!   The prediction last week was we would see a 20 to 30 cent price hike. So what happened? While I’m not one to look that proverbial gift horse in the mouth, I did want to know why.  After all, when the gas tax holiday ended on December 31st, we all expected to see gas prices go up.

So I did a little research and I found a study done by the Institute of Taxation and Economic Policy. And that think tank has long contended that gas tax holidays don’t work well because most of the savings is absorbed by middle men and never reaches the consumer.

It analyzed the six months that the gas tax holiday was in effect in New York State. The study was published in New York Focus.

Among its findings, the oil industry absorbed 30 percent of the so-called savings, and only 42 percent of the money saved was actually passed along to us.  That makes sense when you look at Forbes analysis.

Consider the fact that from January to June 1 of last year, the national average price of a gallon of gas was $4.02. Compare that to New York State where the average was $4.10. That’s a difference of 8 cents. So since the state gas tax was 16 cents, it would stand to reason that after the gas tax holiday, the New York State average would be about 8 cents less than the national average.

After the gas tax holiday went into effect, from June first to the end of the year, the New York State average was $4.22 a gallon.  But nationally, it was the same price – $4.22 a gallon.  So during the gas tax holiday, the average price in New York was 8 cents higher than we would expect.  So it’s a reasonable assumption that we weren’t seeing the full savings even when the gas tax holiday was in effect.

I also called Bill Adams, the president of the New York State Association of Service Stations and Repair Shops.  He says the wholesale price of gas, the price that gas station owners pay, dropped more than 20 cents in a week.

So a drop in the wholesale price, combined with the fact we weren’t seeing the full savings anyway, may be the reason we’re seeing very little change at the pump.