Fascinating:  sales of highway fuels are tanking in Idaho.  The latest figures from the state Tax Commission shows a 6 percent year-over-year decline in gasoline sales.  In the first quarter of 2007, Idaho’s gas stations sold 151.6 million gallons of gas; in the first quarter of 2008, sales totaled just 142.7 million gallons.  

That’s quite a change, especially considering that the state’s population has been growing at a clip of at least 2 percent each year for the last half-decade.  Between population growth and consumption declines, actual per capita sales might have fallen by as much as 8 percent in a single year. 

And if you believe the state’s numbers, it looks like highway diesel sales fell even faster, with a year-over-year decline of nearly 9 percent in the first quarter.  

Then again, I think there’s very good reason to be skeptical about that diesel decline…

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  • Diesel fuel comes in 2 varieties:  the stuff that’s legal to use on the highway, and fuel that’s illegal for highway use, and is marked with a special dye.   Dyed diesel is used for farm equipment, construction machinery, and other off-road uses, and it’s cheaper than regular diesel because it’s exempted from standard highway fuel taxes. 

    So why am I skeptical about the on-road diesel figures?  Because the decline in highway diesel sales was almost perfectly offset by a spike in the consumption of off-road, dyed diesel.  This, of course, raises the possibility that some folks, stung by high diesel prices, are trying to trim fuel costs by using untaxed, dyed diesel in their big rigs. 

    Of course, I don’t have any direct evidence that there’s been an increase in fuel tax evasion.  But as far as I can tell, it’s a pretty plausible explanation for the recent trends.  Although it’s illegal in Idaho to use dyed diesel for a highway vehicle, oddly enough there’s no actual penalty for the infraction.  That’s right—no penalty at all for using dyed diesel in Idaho, not even a perfunctory fine.  (The law says “thou shalt not,” but there’s no “or else.”)  Worse, the state simply has no enforcement staff whatsoever. So at the state level, the prohibition on dyed diesel on the highway completely toothless. 

    Of course, there’s still a federal penalty for using dyed diesel.  But from what I’ve been told, the IRS has only one or two staffers in the state to enforce it.

    So I think it’s pretty likely that high diesel prices are leading some cash-strapped truckers to try to skirt the fuel tax by filling their tanks with dyed diesel.  The Idaho tax department—a helpful and responsive bunch, at least in my experience—are aware of the issue, but it’ll take a while to come up with a solution that’ll fly with the state government. And in the meantime, there’s just no telling what the fuel real trend is in Idaho.  Maybe highway diesel is down by 9 percent.  But I doubt it.