Gas prices low, but at what cost?
Motorists may be enjoying the low gas prices, but a sustained price drop at the pumps could wreak havoc on California’s struggling infrastructure.
For the state’s already dwindling transportation coffers, the shrinking prices are translating to trouble when it comes to keeping up with the growing demands of infrastructure maintenance.
Funded largely through gasoline tax revenues, the already low flow of cash to statewide maintenance and building projects could suffer even more.
If the U.S. Energy Information Administration predictions are correct, 2015 could see fuel prices settle consistently well below the $3 mark for most of the year – good news for consumers, but not so much for road projects.
Industry experts say despite the increases in the sale of gasoline, revenues flowing into the state’s roadway maintenance “tank” will suffer substantially.
Celia McAdam, executive director of the Placer County Transportation Planning Agency, said funding California’s transportation funding system is “incredibly complex.”
“In actuality [a drop in fuel prices] means less money,” she said. “The lowering of gas prices means there will be less in transportation funding.”
California has struggled back and forth with how to fund maintenance on aging infrastructure for decades, finding more recently that there simply isn’t enough money to go around.
Unadjusted for inflation since the 1990s, the gas-linked funding stream faces yet another challenge in the form of the now falling nationwide prices.
“Even as it is, all these taxes on gas cover less than half of what it takes to maintain the roads,” McAdam said. “Everybody is going to take a haircut.”
For the construction industry, the turmoil equates to fewer contracts and less work.
Tom Holsman, CEO of Associated General Contractors of California, said the construction industry has seen the evidence of falling revenue first hand.
“The lack of revenue for new highway and bridge building work is down significantly driven in large part to the fact that the bonds sold to bolster infrastructure spending have already been allocated,” he said in an email. “Gas tax revenue is down dramatically - driven by more fuel efficient vehicles and exacerbated by the significant decline in the price per gallon of gas.”
Holsman said his organization has been working with legislators and other industry groups to address the funding gap.
According to AAA, the crude availability has, in essence, flooded the market driving down demand to the lowest point since May 2009.
“The dramatic slide in retail gas prices has been driven by a similar plummet in global crude oil prices since the end of the summer of 2014,” said Cynthia Harris, AAA Northern California spokesperson. “This decline in the price of oil has been a product of weak demand combined with abundant supply.”