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Lubbock economist says high gas prices are here to stay; cost cutting into City’s fuel budget

Published: Jun. 22, 2022 at 10:41 PM CDT
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LUBBOCK, Texas (KCBD) - After half the year, the City of Lubbock has already spent three-quarters of its fuel budget.

It’s no easier for many other families and businesses.

President Biden has proposed a federal gas tax holiday to ease the burden. If it moves past Congress, it could save Americans about 18 cents per gallon, but many lawmakers believe it doesn’t address the real problem.

Michael Noel, professor of Economics at Texas Tech, says even if it does pass, prices wouldn’t come anywhere close to the norm in Lubbock.

“These are record high gas prices. We haven’t seen anything like this in Lubbock. The prices we’re experiencing now is kind of what California used to have all the time,” Noel said. “Ten or 15 cents is lovely, but it’s not going to return us to where we were before or even close to it.”

The average for a gallon of gas in the Hub City is now $4.42 according to AAA. Expecting gas prices to rise this year, the City of Lubbock set more money aside for fuel for its fleet. Chief Financial Officer Blu Kostelich says it wasn’t expecting something this drastic, though. After May, the City has gone through $2.7 million of its $3.6 million fuel budget.

President Biden is calling on the industry to refine more oil and bring down prices.

“These are not normal times. Bring down the price you are charging at the pump to reflect the cost you are paying for the product,” Biden said.

Noel says demand is absolutely raging, as people want to get out after the pandemic. The Russian invasion of Ukraine also throws in a unique twist. The price hike would’ve happened no matter the election results, Noel says, but policies in place are making the response more challenging.

“It was going to happen, but having an anti-oil policy for a long period of time where it’s more...it’s difficult to build refineries. It’s difficult to get pipelines in on the ground. It’s difficult to move oil around. It’s difficult to get new permits to drill. Once you do that and then you have a situation like this, things just can’t sort of change overnight,” Noel said.

Before anything changes, Lubbock’s police, firefighters and other crews still have to provide essential services for the city. Kostelich says at the end of the year, the City expects to be half a million dollars, or 14 percent, over the fuel budget. He says the city is trying to find ways to be more efficient, but these essential services can’t just stop.

Fortunately, he says sales tax numbers are expected to come in over budget by more than $6 million, so that will absorb the fuel costs. He says each year, the City looks at departments’ usage, service level changes and where gas prices are expected to go, to try and anticipate the overall cost and set the right budget.

Noel says the high prices are temporary, but it will take time for demand to die down.

“It’s going to take some time. Do not expect it to be fixed this summer, or even this winter,” Noel said. “So, it’s going to be a painful time. I’m aware that everyone really wants to get out there and go for a nice road trip after a couple years of staying home. The reality is, if some people can wait a little longer, prices will be cheaper. That will be the reward for them at the other end.”

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