Posted on 01/06/2003 8:04:09 PM PST by Ernest_at_the_Beach
Will harbor business sail on?
Ports: State's resumption of 'bunker fuel' sales tax has many worried ships will refuel elsewhere.
Wharfman James Long unhooks oil line to barge after pumping the fuel into the barge at Chemoil oil pumps Thursday at the Long Beach harbor. (Larry Enright / For the Press-Telegram)
You're at a crossroads. Your fuel tank is nearing empty and you spot two nearby gas stations. Which do you head for? The nearest one, or the one with the cheapest prices?
In today's sluggish economy most motorists head for the less expensive station.
And that mentality is what suppliers of ship fuel say is going to cost them business this year now that an 8 percent tax is being added to fuel sales in California.
On Jan. 1, a state sales exemption expired for the sales of so-called "bunker fuels,' or ship fuel. Now, the people who sell the fuel and related business owners are bracing for what they say could be a 50 percent drop in sales.
The current market price for the fuel is about $150 to $160 per metric ton. It, like the cost of fuel at gas stations, usually rises and falls due to various factors, including supply and demand. The tax will add another $10 per metric ton to the cost of that fuel in California.
Most suppliers surveyed by the Press- Telegram believe that additional cost will drive business out of the state.
"The ships now are very efficient. They can make a round trip for the Far East without having to refuel,' said Gene Hester, vice president of the Port of Los Angeles-based Jankovich Co., a local bunker fuel supplier.
"There'll be a ripple effect,' he predicted. "All the barge operators and tug operators are now looking at less work.'
The tax isn't a new one, but it hasn't been levied in a decade. What happened the last time the tax was in place leads many to conclude that it's bad for the state's economy.
In July 1991, the state withdrew the sales tax exemption. When the tax was restored that year, a well-documented drop in bunker fuel sales occurred almost instantaneously.
This led to the tax being dropped 18 months later. During the year and a half that the tax was in place, many fuel suppliers and related operators saw their business decline by as much as 50 percent as shippers chose to refuel in Seattle, Mexico and other places outside California where it was less expensive.
"About 10 years ago, the LA/Long Beach bunker market was about $3 million to $4 million barrels a month,' said Ted Chrestensen, a general manager with fuel supplier Chemoil, a San Francisco-based company with a branch at the Port of Long Beach and another office in Carson.
"When the bunker tax went in, that volume dropped to below $1 million. We believe it probably won't be as drastic a decrease (as 10 years ago),' Chrestensen said. "But we won't be surprised to see the market get cut in half again.'
Chemoil, one of six bunker fuel suppliers near the Long Beach-Los Angeles harbor, operates globally, with numerous locations domestically and around the world. It, along with many other companies, most of them smaller operations, may be forced to lay off workers if revenue decreases sharply. However, so far no one has announced any layoff plans.
The state Legislature last year voted to extend the tax exemption for another 10 years, but the proposal was vetoed by Gov. Gray Davis.
"While I would ordinarily sign this measure,' Davis said at the time, "the state's very difficult financial condition requires me to veto this bill because it would result in total state and local revenue losses in the range of $22.3 million to $35.5 million depending on the consumption of bunker fuel.
"In the current fiscal environment, enacting a measure with such losses would not be prudent,' the governor added.
Those affected by the revival of the tax disagree.
"Davis' people said we've got such a budget deficit we need to increase revenue,' Hester said. "But they're not looking at the big picture.'
Rick Matthews, superintendent of Chemoil's Port of Long Beach terminal, agreed. "It's actually going to decrease revenue instead of increase revenue,' Matthews said.
Hester and Matthews may have a point. A study conducted by Northern California- based TDS Economics on behalf of the Pacific Merchant Shipping Association states that the Long Beach-Los Angeles area is expected to see an annual net decrease in state and local government revenues of $3 million to $11 million because the tax was once again tacked on to the cost of doing business here.
And since the Long Beach and L.A. ports account for about 75 percent of bunker sales in the state, the statewide annual decrease in sales tax revenues could be in the $4 million to $15 million range, the report asserts.
Not mentioned in the study were other factors, including the costs of higher unemployment and loss of business that the tax could cause.
Currently, the Pacific Merchant Shipping Association, which has been the most outspoken opponent of the tax, is rallying its allies and hopes to introduce emergency legislation to suspend the taxation by the end of March.
But if it fails, many fuel suppliers, tug and barge operators, ship handlers and others anticipate their business will see a steep drop as ships veer toward refueling at cheaper locations.
Barry Baldwin, a director of fuel supplier Foss Maritime, put it this way: "Like any reasonable, intelligent people, they'll go where the price is lowest.'
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What is bunker fuel, exactly? Is it like "red dye" diesel? How many gallons does this equate to?
68-69TonkinGulfYatchClub --
Would you have an answer for the question at post # 3?
And the business that stays in the state will just have to reach into their wallets and.... Oh, wait-a-minute... Doh....! They'll just pass the extra cost onto the consumers.
LOFL, is there anything more stupid than a California liberal?
Typical liberal mentality. How can you lose money you do not yet have?
Which affirms the intelligence of the Cali pols.
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