Image source: Fox Business
President Biden has called for a three-month suspension of the nation’s gasoline tax in reaction to the nation’s skyrocketing energy prices.
A gallon of gasoline, or petrol, now costs about $5 (£4) on average, up from about $3 a year ago. President Biden is under pressure to answer because there will be national congressional elections in November. But, according to analysts, eliminating the charge would only have a little effect on household fuel and diesel expenditures.
Political support for the gas tax holiday, which would require a congressional act, is also in doubt since members of President Biden’s party worry that it would disproportionately benefit oil and gas companies. The White House acknowledged the criticism but insisted that politicians should try their best to lessen the burden on families.
The administration stated that “a gas tax holiday alone will not, on its own, reduce the run-up in costs that we’ve experienced.”
“Congress should take whatever action it can to give working families breathing room at this particular time when the situation in Ukraine is placing expenses on American households.”
Why President Biden is proposing a tax holiday
In order to help pay for roadway infrastructure, the US currently levies a tax on gasoline and diesel that amounts to around 18 cents per gallon and 24 cents, respectively—according to President Biden, ending the fee until September would cost the federal government $10 billion. The initiative is the most recent attempt by nations worldwide to address the skyrocketing energy prices.
Since last year, oil prices have increased as demand has outpaced supply, which is capped by reductions many businesses made after the pandemic struck in 2020 and caused demand to collapse. In addition, the conflict in Ukraine has forced Western nations to avoid Russian oil, a significant energy producer, which has added to the shortage.
The imbalance between supply and demand for petroleum products is the root of the problem, according to a representative of the industry association American Fuel and Petrochemical Manufacturers. “Pausing the federal gas tax will undoubtedly provide near-term relief for US drivers, but it won’t solve the root of the issue,” the representative said.
It claimed that in order to increase US energy production, longer-term measures are required.
President Biden has already taken action, such as releasing previously unheard-of amounts of oil from national reserves and removing import levies on solar panels. In addition, President Biden is pushing state governments, which normally levy their taxes, often greater than the federal government’s, to take similar action in addition to suspending the federal gasoline tax. These charges have already been suspended in certain states, including New York.
Along with increasing his criticism of the industry in recent weeks, the president has urged oil and gas companies to improve their output. However, the US has little political impetus for funding household relief through anything like the UK’s recently announced windfall tax on energy business profits.