The Week

Drivers throughout the District of Columbia and the Washington, D.C. metro area haven’t seen much change at the pump in the last week or the last month. The gas price average in the District of Columbia is $2.30, which is down four cents in the last week and down 57 cents from a year ago. The gas price average in the Washington, D.C. metro area is $2.17, which is down a penny in the last week and down 50 cents from this date last year. Pump prices will become even pricier in the District, adding to the cost of living here.

Motorists and consumers in the District will soon face a gas tax increase of 10 cents per gallon. It was foreordained and predestinated in the District Council’s $15.5 billion FY2021 Budget Support Act. Currently, the District imposes a 23.5 cent local motor vehicle fuel tax on each gallon of gasoline sold in the city. At this time, all revenue from this tax is dedicated to the Highway Trust Fund. The new surcharge will go directly to the capital budget for local street improvements.

The DC Council contends the gas tax hike will be equivalent to the motor fuel tax rate in Northern Virginia, and lower than it is in Maryland. But that’s of little consolation to motorists in the District. The statewide average cost of a gallon of gasoline is below $2 in Virginia. It’s 31 cents higher a gallon in the District. Plus, pump prices in the District outpace the regional retail average cost by 13 cents a gallon.

The city’s local fuel tax will jump to an effective tax rate of 33.5 cents per gallon, as early as October, the dawn of Fiscal Year 2021. However, the total state plus federal fuel excise tax in the District is 41.9 cents on each gallon of gasoline consumers purchase in the city. Motorists in the District pay a tax of 47.9 cents a gallon on diesel fuel, according to July 2020 data from the American Petroleum Institute (API).

“Pretty soon, motorists in the city will pay 51.9 cents a gallon in total gasoline taxes,” said John B. Townsend II, AAA Mid-Atlantic’s Manager of Public and Government Affairs. “That compares to an effective fuel tax rate of 47.8 cents a gallon in Virginia and an effective fuel excise tax rate of 54.7 cents a gallon in Maryland. But that only tells part of the story. For consumers, the District is one of the most expensive markets around to purchase gasoline. It will become an even more expensive place to buy gasoline in the future. The new fuel surcharge will never go away and it is pegged to inflation, with no sunset. The new surcharge raises $5.6 million in additional fuel tax revenue by 2021.”

CURRENT AND PAST GAS PRICE AVERAGES

Regular Unleaded Gasoline (*indicates record high)

“The cost of living in Washington, D.C. is notoriously high,” the saying goes. In terms of profitability, the nation’s capital is perched atop the list of the “Top Ten Best Earning Metro Markets” in the United States, according to data from the Oil Price Information Service (OPIS). Why? It is a function of the paucity of gas stations in the city (only 105 sites), the costs of operating retail gas stations in the District, and the swing between the delivered price of gasoline around town and average retail prices in the city.

Well, the current implied project margin on each gallon of gasoline sold in the District of Columbia averaged 61.8 cents a gallon in the current 7-day period. That compares to an average profit of 62.3 cents per gallon a week ago. But that’s not the complete story of the sizeable markup on the cost of gasoline that consumers face at retail gas or filling stations in the District.

Now, the average pump price for the current 7-day period was $2.33.9 per gallon in the District, reports OPIS. However, the average net price in the District during this span was $1.90.4 per gallon (the net price is average pump price less all state, federal and local taxed and 1.5 cts/gal for freight). That’s a swing of 43.9 cents a gallon.

Then there is the average “rack” price in the city. That’s the “average wholesale price for the current 7-day period.” It averaged $1.28.6 a gallon. Think of it this way, the “rack price” is “price of gasoline or diesel, loaded onto a truck at the distribution terminal, ready for delivery to retail stations or end users.” By the way, “most branded franchisees purchase gasoline at a delivered price called the Dealer Tank Wagon price that is typically higher than the branded rack price.”

There you have it. The swing between the average pump price in the city and the rack price used in wholesale transactions averaged $1.05.3 per gallon during the current 7-day period in Washington, D.C. Meanwhile, today’s national gas price average is $2.18, unchanged in the last week, down respectively a penny in the last month and 54 cents from this time last year. Crude oil supplies declined this week as supplies of gasoline increased, creating further volatility in the market. 

At the close of NYMEX trading Friday, West Texas Intermediate (WTI) crude oil settled at $40.27 per barrel, $1.02 lower than last Friday’s close. Like gasoline, crude prices have moved very little, hovering between $39 and $42 all month long. Following the Energy Information Administration’s (EIA) latest report showing a large drop in crude supplies, crude prices edged higher. However, prices fell Thursday following a tweet from the President suggesting the U.S. should postpone the November election. The market was also impacted by news that the U.S. economy contracted at its steepest pace since the Great Depression in the second quarter.

The Weekend

“Although gas prices haven’t changed much in the past few weeks, prices are likely to fluctuate throughout the rest of the summer due to COVID-19 concerns,” Townsend explained. “Pump prices have been pushing less expensive recently as gasoline demand continues to drop.”

The Week Ahead

As forecasters keep watch of Hurricane Isaias moving toward Florida’s eastern coast, analysts are not very concerned about an impact on oil and natural-gas production. Should the storm change direction and head to the Gulf of Mexico, the threat to oil production could grow and influence oil and gas prices.

AAA has a variety of resources to help motorists save on fuel:

• Shell Fuel Rewards Program for AAA Members: (https://www.AAA.com/Shell) gives AAA members nationwide a discount on gasoline at Shell stations when they join the Fuel Rewards® program.

• Fuel Price Finder (https://www.AAA.com/fuelfinder) locates the lowest fuel price in your area. 

• AAA Gas Cost Calculator (https://gasprices.aaa.com/aaa-gas-cost-calculator/) helps budget travel expenses. 

• TripTik Mobile (https://www.aaa.com/mobile) plots fuel prices along your travel route. 

• AAA's Member Rewards Visa® Credit Card (https://www.AAA.com/financial/AAAvisa.htm) accumulates double points on fuel purchases.  

Next Weekend Gas Watch: Friday, August 7, 2020

Follow us on Twitter: @AAADCNews

Like us on Facebook: AAA Mid-Atlantic News

Washington, D.C. Mailing Address:
1405 G Street NW
Washington, DC 20005

AAA provides automotive, travel and insurance services to 60 million members nationwide and nearly 82,000 members in the District of Columbia.  AAA advocates for the safety and mobility of its members and has been committed to outstanding road service for more than 100 years.  The not-for-profit, fully tax-paying member organization works on behalf of motorists, who can now map a route, find local gas prices, discover discounts, book a hotel and track their roadside assistance service with the AAA Mobile app for iPhone, iPad and Android. For more information, visit  https://aaa.com