White House May Propose Gas Tax Holiday [Updated]

Matt Posky
by Matt Posky

National fuel prices are currently averaging right around $5.00 per gallon in the United States. However, there are plenty of states with stations listing gasoline well above $6.00 per gallon with diesel being driven even higher. This has started to wreak havoc on the trucking industry, which is now seeing companies pausing shipments to renegotiate contracts, and infuriated consumers who remember a gallon of gas being $2.17 during the summer of 2020.

Earlier this year, Congress and the White House suggested suspending the federal fuel tax to alleviate the financial burden. But the notion was walked back, as prices were relatively low at the time (roughly $3.50 per gallon) and criticisms swelled that this simply exchanged one problem for another. Four months later and things are looking rather desperate, with the Biden administration revisiting the premise of pausing fuel tax to help soften the blow of record-breaking prices at the pump.

But the fuel tax has been pegged at 18.4 cents per gallon for ages, making any suspensions a drop in the bucket — or perhaps more accurately, a literal squeeze into the tank. It also effectively forces the government to figure out another way to help the United States’ ailing roadway infrastructure, with concerned parties fretting over where that money will be coming from. Despite the passing of the $1.2 trillion infrastructure bill, only $110 billion of the 2,702-page legislative package goes toward funding the repair and improvement of bridges and roads. The rest has been earmarked for advancing public transpiration, Amtrak funding, improving the national energy grid, clean-energy initiatives, spurring electric vehicle adoption, broadband internet, and water protection. However, the previous $300 billion slated for the Highway Trust Fund over the next five years has also remained in place.

Meanwhile, the federal gas tax rakes in roughly $45 billion per year and accounts for almost the entirety of the federal spending used for servicing America’s highways per year. Something which President Joe Biden recently said he had considered pausing.

“Yes, I’m considering it,” Biden told reporters Monday. “I hope to have a decision based on the data. I’m looking for by the end of the week.”

The White House has been critical of Russia’s invasion of Ukraine and has often faulted the situation as the leading cause of high fuel prices. While it certainly hasn’t helped things, surging fuel prices had begun long before a single Russian soldier crossed the border. Operating under the assumption that Biden had won the 2020 election, the market reacted to proposed environmental policies that forced the price of oil to climb in November of that year. Fuel prices followed suit, with the invasion of Ukraine simply making the market even more volatile.

But oil concerns had also grown cautious of overproduction after COVID lockdowns forced down demand to a point that oil began trading in the negative. The situation actually became so grim that companies were actually paying people who had the ability to take surplus fuel off their hands in 2020 because they no longer had anywhere to store it.

Jumping back into the present, the Biden administration has done a few things in a bid to help normalize pricing. Biden has released some of the U.S. strategic petroleum supply to the market and the administration plans to continue meeting with the CEOs of major oil companies to discuss how best to manage the situation. According to The New York Times, another meeting is scheduled for this week. But nothing seems to be working and critics have argued that the White House’s environmental policies and unfettered government spending are at the heart of what’s driving up costs.

From NYT:

The White House and congressional Democrats have discussed a national gas tax holiday as one of the few options for bringing down the cost at the pump, as external factors have been major drivers of surging prices. The high cost of gas looms as a significant liability for Mr. Biden and Democratic lawmakers as the midterm elections approach.

When gasoline prices surged in March, the White House turned to the Strategic Petroleum Reserve, ordering the release of up to one million barrels of oil a day for 180 days in hopes of meeting demand. The overall effect has been limited, and gas prices remain near record highs.

Mr. Biden said on Monday that his team was planning to meet this week with the chief executives of major oil companies. He chastised some of the largest oil companies last week for profiteering while American consumers endured high prices.

Taking into account the average fuel economy of U.S. vehicles, it’s hard to see a suspension of the federal fuel tax making a big difference. The average American drives roughly 14,000 miles per year and owns a vehicle averaging somewhere around 26 miles per gallon. That last number is a little troublesome since the University of Michigan abandoned studying the practical average economy of U.S. vehicles. But it left off around a rather stagnant 25 mpg a few years ago so we’re assuming it’s come up a bit since then.

Still, that only works out to about $99 in savings annually and assumes fuel prices don’t increase through the rest of this year. Based on how much the price of a gallon of gas has spiked already, it’s unlikely that any drivers would actually recoup the additional money they’ve already had to put into their respective tanks. While diesel fuel is higher (at 24.4 cents per gallon), owners of those vehicles will still find themselves in a similar situation.

Considering the unprecedented nature of the times, it’s difficult to assume what the outcome will be. Your author was recently using videogames to unwind and noticed that the real-world fuel prices in California now vastly exceeded those presented in the Cyberpunk 2077 — a game released in 2020 that’s set in an intentionally ridiculous dystopian future focused on a global energy crisis, corrupt governance, crumbling infrastructure, rampant corporate influence, habitual street violence, and unprecedented levels of income inequality. The ridiculousness of the real world is now exceeding what fiction has on offer and does not bode well for any hastily devised schemes designed to temporarily appease voters. People need real and permanent solutions to rising problems and tamping down the swelling price of fuel in a serious manner seems a reasonable request.

But here’s the rub: U.S. corporate price markups and profits are currently at the highest levels witnessed since the 1950s. This includes major oil companies (e.g. ExxonMobil, BP, Shell, Chevron, etc.) that saw their collective Q1 2022 profits triple against the first quarter of 2021. Meanwhile, the Biden administration has repeatedly stated that it wants the U.S. to transition toward renewable energy and all-electric vehicles. Neither group really seems to have a vested interest in solving the problem of fuel prices and one worries that policy will ultimately reflect that.

[Update 6/22/2022: Joe Biden formally asked Congress to suspend the fuel tax for three months on Wednesday. “Today I’m calling on Congress to suspend the Federal gas tax for the next 90 days, through the busy summer season, busy travel season,” he told the press, adding that states could also temporarily pause their own fuel taxes.

There has been some light criticisms among Democrats, including Rep. Peter DeFazio, chair of the House Committee on Transportation and Infrastructure.

“Although well-intentioned, this policy would at best achieve only minuscule relief while blowing a $10 billion dollar hole in the Highway Trust Fund that would need to be filled if we want to continue to fix crumbling bridges, address the spike in traffic deaths, and build a modern infrastructure system,” DeFazio said in a statement to CBS News. “Furthermore, encouraging state governments to suspend their gas taxes undermines the impact of the Bipartisan Infrastructure Law by reducing funds available to states to spend on infrastructure improvements.”

Though the Biden administration did get the support of its own cabinet. This included U.S. Secretary of Energy Jennifer Granholm, who suggested to the press that the measure would only be part of a large program to help address rising energy costs. However Republicans have predominantly come out against the plan, even going so far to mock it or recalling Barack Obama calling the scheme a “gimmick” when it was pitched by Hillary Clinton during the 2008 presidential campaign.]

[Image: CC7/Shutterstock]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • Lou65688186 Lou65688186 on Aug 01, 2022

    Hi my name is Louis and I’m interested on the 2000Toyota LE V6 manuel speed shift

  • Cprescott Cprescott on Aug 18, 2022

    They have already proposed this and then done nothing about it. Right now let's not cut funding to roads since infrastructure to this Administration is building the most effective pathway for illegal aliens to invade our country.

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