Low gas prices aid state budget

Biggest savings for Iowa's fleets

Motorists pump gas at the Waterfront Hy-Vee Gas station in Iowa City on Wednesday, December 3, 2014. (Adam Wesley/The Ga
Motorists pump gas at the Waterfront Hy-Vee Gas station in Iowa City on Wednesday, December 3, 2014. (Adam Wesley/The Gazette)

DES MOINES — A break at the pump has arrived just in time for the holidays for consumers in Iowa and across the country.

But theirs are not the only pocketbooks feeling relief thanks to plummeting gas prices.

Dropping gas prices, which are at their lowest levels in four years, can have a positive effect on the state budget, Iowa officials say, although they were hesitant to assign a dollar amount to how much that might be.

The average price per gallon in Iowa dove below $2.70 this past week, nearly a full dollar per gallon lower than its summer peak and more than 40 cents lower than last year at this time.

The most significant savings come to the fleet of vehicles moving across the state, particularly within the Transportation and Public Safety departments, officials said.

“Obviously it will have a very positive impact on budgets for any organization that has a lot of vehicles out,” said David Roederer, director of the state Department of Management. “The exact amount I really wouldn’t even want to guess. The minute I do, they’ll raise gas prices 10 cents.”

At the Department of Transportation, planning director Stuart Anderson said savings can come from lower operational costs as well as possibly lower construction costs.

“The magnitude of the savings will vary based on many factors such as timing, when fuel is purchased, when construction projects are put out for bid, etc.,” Anderson said in an email. “That can’t be quantified in just a quick snapshot — too many variables.”

Lower gas prices also present the possibility of improved state revenue in the form of tax receipts. If consumers are paying less for gas, theoretically they have more to spend on other things, which could mean more tax revenue for the state.

That may not happen, cautions a report on Time magazine’s website. According to the report, top-end consumers are unlikely to change their spending habits based on gas prices, and lower-income consumers may be freed from the clutches of high gas prices but still face stagnant wages, slow hiring and higher housing and health care costs.

Roederer is more hopeful.

“It generally puts people in a better mood (in regard to spending),” Roederer said of lower fuel prices. “Any time inputs are less, it’s good for the economy .

“I don’t know what it means. I don’t know where it’s going to go. But I think it’s going to have an impact. I tell you what, when gas prices first shot up, people just didn’t go anywhere.”

Agricultural effects

Some statewide industries, in particular agriculture and biofuels, could be hampered by plunging gas prices.

But leaders are not worried — yet.

Dave Miller, director of research and commodity services for the Iowa Farm Bureau, said fuel prices are unlikely to have a dramatic influence on farmers at this time of year, with the harvest complete and next year’s planting months away.

But farmers still can find ways to take advantage of low gas prices even in the winter months, Miller said.

“A lot of grain is in bins, and it takes fuel to move that grain to market, and lower fuel prices help lower transportation costs for farmers,” Miller wrote in an email. “It just isn’t as a big an impact as the cost of fuel for production .

“During the winter months, natural gas and propane prices probably have a bigger impact on the bottom line of Iowa farmers than does a change in gasoline or diesel prices. If diesel prices come down enough, some farmers will lock in those lower prices for diesel fuel for 2015.”

Miller said lower gas prices could have a negative effect on corn prices and thus the state’s ethanol industry.

Monte Shaw, executive director of the Iowa Renewable Fuels Association, said even as gas and corn prices continue to decline, ethanol producers still are able to sell their product for a profit.

“Right now, we’re doing OK,” Shaw said. “We’re still able to, at least as of right now with the price of corn where it is, we are effectively able to produce ethanol .

“The bottom line is the demand remains strong for ethanol, and ethanol remains cost-competitive. So it’s helping keep gas prices low.”

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