Pub 3 2020-2021 Issue 1

33 Fuel taxes are an elastic source of revenue. That elasticity contracted substantially due to COVID-19. So, a funding problem that was festering pre-pandemic is now intensifying. Case in point: The American Association of State Highway and Transportation Officials has said that states have seen a 30-50%drop in revenue since the start of the pandemic. 3. Low fuel taxes collectedmeans deteriorating roads. The perpetual funding gap has exacerbated road repairs, which have been deficient for a long time. The 2017 policy brief points to a continued pattern of deferredmainte- nance as an underlying cause of the United States’ crumbling infrastructure. The brief indicated that the U.S. has been spend- ing only about half the amount needed to fund roads. Historically, prioritizing the con- struction of new roads and bridges over repairing existing roadways also has con- tributed to the lack of upkeep. In the context of a COVID-19 depressed economy, at least 39 states, transporta- tion authorities and local governments have publicly projected declining reve- nues, reported the American Road and Transportation Builders Association. As a result, 14 states have announced $4.5 billion in project delays or cancellations, while 19 local government and authorities have announced project delays or cancella- tions of $4.54 billion. Legislative initiatives and ballot measures also are being post- poned or delayed. 4. Transportation creates amarket for fuel suppliers. Regardless of the type of fuel that market- ers will be selling 10 to 20 years fromnow —be it electricity, renewable fuels or still largely petroleum—safe roads will still be needed to conveymotorists. In fact, it’s probable that roads will need to carry even more vehicles in the future: • Since 1990, the number of registered vehi- cles in the United States has increased about 40%. • Since 1990, U.S. vehiclemiles traveled has increased about 50%. • Amid the pandemic, consumers have expressed a distaste for public transporta- tion, suggesting that people feel safer in their personal vehicles. The RoadAhead Just as fuel tax revenue is not insulated from demand fluctuations, fuel marketers are not insulated from fluctuations in con- sumer preferences — and that includes the broader consumer experience that goes beyond what happens at the station. Routine driving, fueling up, vehicle per- formance and maintenance — and their associated costs — influence the consum- er’s perception of what it means to be a motorist. This in turn impacts consumers’ future lifestyle decisions. With traffic congestion wasting motor- ists’ time and money, driving is becom- ing an unpleasant chore for many people. Absent a positive driving experi- ence, petroleum marketers’ existing cus- tomer base would be sufficiently incen- tivized to endorse alternative transpor- tation ideas. There are short-term benefits to revamping road funding, too. Transportation is a key contributor to the U.S. economy. The 2017 policy anal- ysis reports that investing in transporta- tion infrastructure (when properly exe- cuted), raises economic growth. Amid the prospect of a weakening economy, establishing a sustainable funding plan to support infrastructure may be a road back to stronger economic times. It is helpful to view our roadway system like the arteries and veins of our national body. When our arteries are clogged and our veins are stressed, we face an unhealthy, unsustainable situation. In summary, roadway utilization is at its highest levels, the infrastruc- ture continues to age, and the current approach to funding is unsustaina- ble. This is a circular problem that has critical implications for both the short and long-term viability of the fueling market. It is imperative that leaders revamp road funding. The very future of petroleum market- ing may depend on it. 3 Joe O’Brien is vice president of marketing at Source™ North America Corporation. Contact himat jobrien@sourcena.com, or visit www.sourcena.com to learnmore. The perpetual funding gap has exacerbated road repairs, which have been deficient for a long time. The 2017 policy brief points to a continued pattern of deferred maintenance as an underlying cause of the United States’ crumbling infrastructure.