Federal gas tax holiday a mistake

America’s motorists and commercial drivers do not need the three-month federal gasoline and diesel taxes “holiday” proposed by President Joe Biden. The short tax reprieve could do more harm than good. It is not difficult to understand why.

The price of fuel is built on supply and demand. Generally, if there is a decline in supply, the price increases, encouraging motorists to conserve. If demand decreases significantly, the price, under normal economic circumstances, drops.

With gasoline prices hovering at just below, at or slightly above $5 a gallon, the 18-cent-a-gallon reduction proposed by the president really is not going to amount to very much for average motorists.

The federal tax on diesel fuel is 24 cents.

It is estimated that if the proposed “holiday” savings were passed on fully to the nation’s average motorists, they would save only about 3.6% at the pump.

Meanwhile, federal officials have estimated that the three-month waiver would result in a $10 billion loss in federal

highway-construction money.

Rather than implementing Biden’s idea, it would be better if as many motorists as possible would strive to cut some of their unnecessary travel and, thus, cut their gasoline purchases. A sustained effort on their part would have a positive effect at the gasoline pumps over time.

Biden’s plan would have the opposite effect.

In its June 23 edition, the Wall Street Journal reported that “consumers are beginning to temper fuel purchases in response to the historically high prices.”

The Journal reported the opinion of Garrett Golding, a business economist at the Federal Reserve Bank of Dallas, that with inflationary pressures pushing up prices for many consumer goods, and wages not keeping pace, consumers are ill-equipped to handle a prolonged increase in fuel prices.

Andrew Clyde, chief executive of Arkansas-based fuel retailer Murphy USA Inc., which operates stores in 27 states, said consumers are buying slightly less at the pump while making more frequent visits. He said that is reminiscent of how drivers reacted in 2008, when they searched for the cheapest gas, switched fuel grades and eventually cut down on miles driven.

Eventually those strategies helped effect a price turnaround.

Unfortunately, the travel and tourism industries suffer when those strategies become rooted, and tourism provides an important economic boost to Pennsylvania.

As motorists ponder the best driving options available for them to help keep more money in their wallets and pocketbooks, they need to understand that some of the challenges surrounding the fuel prices in question will be difficult to defeat. For example, Russia’s war in Ukraine continues to impact fuel prices around the world.

Also helping gasoline prices climb to record levels is the fact that U.S. refineries, since before the pandemic, have cut their capacity by about 800,000 barrels a day.

The Ukraine war alone should serve as a major patriotic conservation incentive for Americans, but the Biden administration needs to rethink its ideas for remedying the price problem as well.

The real opportunity for defeating the current gas-price enemy rests with everyone with a driver’s license, not with questionable temporary gimmicks likely more harmful than good.


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