The Sightline Institute's Eric de Place digs into some little-known aspects of Gov. Chris Gregoire's proposed "barrel fee"---a $1.50-per-barrel fee on oil refined in Washington State, which she proposed  as part of a ten-year, $3.6 billion transportation package earlier this month.

Specifically, de Place points out that Gregoire's proposal effectively offloads much of the cost of the new fee to oil consumers outside the state. Assuming oil refiners pass the entire fee on to consumers, it will add about 3.6 cents to the cost of a gallon of gas---an increase that's well within the normal fluctuation of gas prices.

One reason that number is relatively low, de Place reports, is that Washington State refines about twice the oil it actually uses, meaning that about half the new fee would be paid by voters outside the state.

For products that are refined in Washington but consumed elsewhere, the burden of the fee will fall on some combination of out-of-state consumers and oil refiners (and perhaps some oil distributors or marketers to a small extent). Certainly, the oil companies will try to pass the cost of the fee along to their customers, but in markets that are competitively supplied by other sources of fuel, it may be difficult for them to do so. That means the oil firms will have to carve the cost out of their profits.

Looking at a typical barrel of oil, about 70 percent would be turned into transportation fuel, and about half of that would be sold out of state. Another 20 percent would be refined into aviation fuels or lubricants, and the rest would become refined products that wouldn't be subject to the fee.

De Place concludes:

At the end of the day, Washington consumers would be touched by fees on about 35 percent of a typical barrel of oil, yet the state would reap revenue on 90 percent of the barrel.

That’s a pretty sweet deal for Washington’s residents. It’s not such a sweet deal for oil companies because they will end up eating a sizeable portion of the cost of the fee. And it’s not such a sweet deal for drivers in places like Oregon—where much of Washington’s refined fuel is sold—because they will, in effect, be paying more for fuel in order to fund road projects in Washington.