Gasoline prices have crept down an average 7 cents a gallon from the first of the month, but don't count on the trend to continue.
Instead, prices are expected to shoot up 5 cents a gallon Saturday to cover an increase in federal fuels tax that goes into effect Dec. 1, industry officials said."We are not going to raise prices in advance of the tax, but when it does become effective it has to be passed on," said Brent Lowe, regional marketing manager for Chevron U.S.A.
"I can't absorb 5 cents," said a Utah County station operator when asked if he will immediately pass along the tax increase.
Congress voted at the end of October to add a nickel per gallon to everyone's gasoline bill as part of a deficit-reducing budget that included $140 billion in new taxes.
Beginning Saturday, Utahns will pay 14 cents to the federal government and 19 cents to the state for every gallon of unleaded gasoline purchased.
The 5-cent increase will apply to gasoline sitting in station storage tanks as well as wholesale gasoline bought after Saturday.
Given the timing of the tax increase - four months after prices at the pump started soaring in reaction to tensions in the Persian Gulf - service stations expect to hear criticism from motorists.
Since prices have gone up, local refiners and gasoline retailers have enjoyed their largest profit margins in recent months. But it's apparently not enough to absorb a 5-cent increase.
"I'm offended that anyone thinks I can absorb another 5-cent tax. Anytime there is a fair and decent margin it erodes very quickly," said Paul Ashton, a station owner and executive director of the Utah Petroleum Retailers Organization.
He said the 9-10 cents-per-gallon margin retailers were getting at the beginning of November has slowly slid to about 4-5 cents a gallon. And despite the expected 5-cent hike this weekend, Ashton said competitive pressure will force prices down below $1.30 by the end of the year, unless war breaks out in the Middle East.
"I've never seen this market make 10 cents a gallon for very long," he said.
Ashton added that a drop in volume is offsetting wider margins. Apparently motorists have reacted to higher pump prices by buying less fuel. Ashton estimated overall sales volume down 3-6 percent from last year.
Sales of premium are down between 30-35 percent, he said. But that is partly because the phase-out of leaded gasoline has created a grade of unleaded fuel between premium and regular unleaded.