Gas prices have been in the news in Michigan and across the country. But long before the recent jump in the cost of gasoline, listener Jim Ratliff wondered where gas dollars go.
Gas was $3.98 and nine-tenths of a cent at a Citgo station in downtown Kalamazoo, when Jim and I met there one recent afternoon. Jim works downtown. And he bikes to work. But he still spends some time in a car.
“My wife, Heather, and I were driving back from Chicago to Kalamazoo. And we were on I-94 a while ago. And we're seeing all these gas station billboards,” he said.
Jim knows oil is a global commodity. But he wondered: was there anywhere he could buy gas in Kalamazoo County where his dollars would stay local? Does it matter if you buy from a local business? And what about gas taxes?
“If I spend money in Kalamazoo County, does the state money on taxes come back to Kalamazoo County?” Jim asked.
We’re going to talk about where gasoline dollars go with the owner of the Citgo. But first we talk about taxes, with Nick Schirripa, spokesman for the Southwest office of the Michigan Department of Transportation.
Three taxes
“When you’re at the pump, you’re paying three different taxes,” Schirripa explained.
The first one is not a gas tax per se. It’s the six percent state sales tax. That money mostly goes to education. But Michiganders also pay roughly 18 cents per gallon in federal tax, and roughly 27 cents a gallon in state tax. Schirripa says the federal tax goes to roads, and so does the state gas tax money, which is divvied up like this:
“The state gets 39 percent. The county road commissions get 39 percent, and then 22 percent goes to municipalities. So that’s how that all gets separated out. So those taxes collected do in fact go to state, county and local road agencies.”
Such as the Kalamazoo County Road Commission or the City of Kalamazoo. So, a portion of gas tax money does come back to local units. But Schirripa says how much they get has nothing to do with local fuel sales. You can buy your gas in Battle Creek or even Marquette, and Kalamazoo will get the same amount.
A slim profit
And what about the rest of your gas dollar?
“Oil is an international commodity and very little of what you spend on gas stays within your community, no matter where you buy it,” Elizabeth Irvin, a Chicago-based senior transportation analyst with the Union of Concerned Scientists said.
The UCS has studied where gas money ends up. Irvin said about 70 cents on the dollar go to extracting and refining crude oil. Irvin said investing fuel tax dollars in alternatives to gas-powered cars would help keep money local.
“There's some evidence that it actually increases profits for local businesses, particularly for retail and food service businesses,” she said.
That’s because people on foot or on a bike make small but frequent shopping trips.
“They buy less each time they're there, but they're there more often. And they end up spending the same or slightly more in the long run,” she said.
Plus, electric car drivers and cyclists don’t suffer so much when gas prices rise. And all of that is aside from the pressing need to cut fossil fuel consumption to fight climate change.
Irvin says gas stations gross just 10 or 15 cents on a gas dollar. The net profit is even lower.
“Your average local gas station is making more profit off your road trip snacks than off the fuel you buy from them,” she said.
High prices don’t help
Back at the Citgo station downtown, owner Jaswinder Singh of Kalamazoo says it’s true, gas stations like his don’t make much money on gas. We’re standing by the Citgo’s small convenience store.
“Not only my gas station. Like all the gas station people, really hard to make like 10, 12 or 13 cents, and that's all they make right now,” he said.
Singh said higher gas prices do not translate to higher profits for his business. In fact they have the opposite effect.
“Right now when gas prices going up, the people stop traveling and everything. They want to stay home. They don't want to go anywhere. Gas is so expensive, they don't travel that much,” he explained.
Singh said it does help when people buy a snack. Perhaps, then, it matters whether you shop at your local convenience store, even if your gas dollars don’t stay put.
Our question-asker Jim Ratliff thinks of one gas station he knows in Augusta.
“A lot of mountain bikers go in there and fuel up, a lot of campers go there, a lot of people who visit Fort Custer use that gas station for much, much more than just buying gas,” he said.
