The proposed efforts of Connecticut state legislators to mitigate rising gasoline prices are akin to building a sand castle too close to the mounting tide. A little engineering to redirect the rising waters might buy a little time, but the tidal forces will prevail and in the end there will be little or nothing left to see from the effort.
The world oil market is massive and complex, with prices driven by supply and demand, market speculation, international events and numerous other factors. Connecticut lawmakers can tweak the taxes the state applies to gas prices and threaten to get tough on profiteering and price gouging, but when the high tide arrives in the form of price spikes, these efforts have scant impact.
It doesn't hurt to try, we suppose. Democratic leaders rolled out a plan Monday to cap the petroleum gross receipts tax. Republicans, the minority party, will likely support the proposal since it was their idea to begin with, the Democrats coming late to the party as prices continue to spike.
Revenues from the gross receipts tax rise and fall with the wholesale cost of fuel. Under the proposal, the tax rate of 7.53 percent would be imposed only up to $3 per wholesale gallon. With that price now $3.18, it would mean a slight rollback. Depending on how much the wholesale price eventually rises, the cap will result in a savings from a penny to upwards of a nickel per gallon.
The legislature could do something more dramatic - between the flat tax and the gross receipts tax the state assesses about 50 cents per gallon - but making a sharp tax cut would create another problem by robbing the state of revenue and exacerbating a projected budget shortfall.
"We understand in Connecticut there's only so much that we can do when prices in so many ways are being driven by external factors," Senate President Donald Williams, D-Brooklyn, said at Monday's news conference.
True enough, but if the legislators approve the tax cap they can at least say they did something.
Driving global oil prices globally is economic growth and resulting increased energy demand in emerging economies, particularly China and India. Rising tensions tied to the potential for an Israeli attack on Iran's nuclear program, and resulting interruptions of the flow of Middle East oil, has caused speculators to further bid up the price.
The Wall Street Journal reported this week that causing more upward pressures on gas prices in the United States is a reduction in the number of Northeast refineries necessary to convert oil into gasoline.
Squeezed by high market prices and facing difficulty getting access to cheaper-to-refine high-grade crude oil, older refineries are losing money and shutting down.
By next year refinery production in the Northeast is projected to decline to 350,000 barrels a day, less than half the amount in 2007, according to the Energy Information Administration. The result is distribution disruptions that push up prices nationally.
Ironically, the high prices have hit even though Americans are doing a good job of reducing energy use, with oil demand expected to hit an 11-year low this year. Since 2005 crude oil imports have fallen by almost 2 million barrels daily. For the first time in 62 years, the United States was a net petroleum-product exporting country in 2011, with net exports of about 1.2 million barrels per day by year's end.
The inability of those massive numbers to positively impact the global price of oil provides some perspective on how little the Connecticut legislature can really do about the pain at the pump.