Rising oil prices could cut $100 million in expected revenues from the state budget and add millions of dollars to North Carolina's fuel bill, legislators were told Tuesday.
``We are now beginning to understand the power of the big oil companies here in our own state,' Lt. Gov. Jim Gardner said as legislators heard from service station owners, wholesale oil dealers and state analysts. ``The end result is we're going to see that a handful of major oil companies are calling all the shots.``All I know is that when gasoline has not cost them one cent more, the major oil companies have raised their prices and made millions.'
No representatives of major oil companies were at the meeting of the Joint Legislative Commission on Governmental Operations, but Gardner said he expects them to meet with the panel Sept. 4.
Local service station owners and wholesalers told the panel that they have not profited by the price increases, which have shot up an average of more than 19 cents a gallon in the two weeks since Iraq invaded Kuwait.
``We can categorically say that we know ... of no gouging by any of our members,' said Don Ward of the N.C. Petroleum Marketers Association.
Dale Richardson, an independent service station operator in High Point, told legislators that his profits on gasoline sales actually have dropped during the price increase.
The oil industry representatives said gasoline prices had been increased by refiners based on ``expectations' of the impact in the Middle East. Some compared it to increased orange juice prices after December's freeze in Florida.
David Crotts, a fiscal analyst for the General Assembly, said the ripple effect from oil price increases have the potential to throw off revenue projections used to adjust this year's budget.
``The potential is there for $50 million to $100 million in reductions in General Fund revenues from what was used this year,' Crotts said.
Crotts said a $141 million ``rainy day fund' included in this year's budget could cover the possible shortfall, but it would require action by the legislature to use the reserve.
Marvin Dorman of the State Budget Office said state agencies already are being ordered to make even deeper cuts in their budgets than the legislature ordered.
Legislators made cuts of about 3 percent in agency budgets and ordered department heads to cut another 1 percent before the fiscal year ends June 30.
``We're going one step further than that,' Dorman said. ``We are holding back about $100 million to $150 million in addition to the rainy day fund. We cannot wait until next spring to find out we have another revenue shortfall.'
State purchasing agents said the oil prices also are affecting the amount of money state agencies use for gasoline, heating oil and diesel fuel.
Russ Nimitz of the Department of Administration said the weekly contract for gasoline for the state will jump by 16 cents a gallon Thursday, a bigger increase than the entire year so far.
He said each penny increase in gasoline costs the state an additional $330,000 per year.
``If that 16 cents holds, and my math is right, we're talking about something like $5.2 million to $5.3 million in additional costs just for gasoline alone,' Nimitz said.
Jake Alexander of the Department of Transportation said a long-term increase in oil prices could eventually lead to cuts of as much as 25 percent from road-building programs because of lost gasoline tax revenues.
Each 10 percent increase in gasoline prices brings about a 1 percent reduction in consumption, he said, which leads to lower tax collections in the long run.