Biden calls on Congress to suspend the gas tax — Here's what that means for prices at the pump (2024)

Biden calls on Congress to suspend the gas tax — Here's what that means for prices at the pump (1)

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Biden calls on Congress to suspend federal gas tax

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President Joe Biden called on Congress Wednesday to temporarily suspend the federal gas tax, as he tries to quell the rapid surge in prices at the pump. While experts say a suspension could provide some immediate relief, it could also keep demand elevated, thereby exacerbating tight supply.

Consumers are getting hit with higher prices everywhere, which has become a headache for the administration ahead of November's midterm elections.

But the rise in fuel prices is perhaps the most noticeable strain on consumer pocketbooks — signs at corner gas bars across the country declare the bad news, the current price per gallon. The national average topped $5 per gallon for the first time ever earlier this month.

It has become an Achilles' heel for the administration, noted OPIS Global's Tom Kloza, "even though it has nothing to do with any policies [Biden's] had since he came into power."

US President Joe Biden delivers remarks on efforts to lower high gas prices in the South Court Auditorium at Eisenhower Executive Office Building June 22, 2022 in Washington, DC.

Jim Watson | AFP | Getty Images

Biden's plan asks Congress to suspend the federal tax on gasoline and diesel fuel for three months, which coincides with the summer driving season. The federal tax is 18 cents per gallon of regular gasoline and 24 cents per gallon for diesel.

The president is also asking states to suspend their gas taxes, or find other ways to provide relief for consumers.

A suspension would "give Americans a little extra breathing room as they deal with the effects of [Russian President Vladimir] Putin's war in Ukraine," the White House said in a statement.

"If this bill is signed and enacted — becomes effective — it will help motorists," said Patrick De Haan, head of petroleum analysis at GasBuddy. But he added that the extent to which any relief is felt will depend on wholesale prices remaining stable. The wording and timing of any potential legislation will also have an impact.

De Haan pointed to New York as an example. The state suspended its gas tax, but at a time when wholesale fuel prices were rising. Ultimately, consumers didn't see much of an impact at the pump because the tax move was offset by higher wholesale prices.

Biden calls on Congress to suspend the gas tax — Here's what that means for prices at the pump (2)

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Still, he said that if this federal measure were implemented today it would "greatly enhance the downside," since gasoline futures have pulled back recently, after rising above $4.

It's unclear whether Biden has congressional support for the legislation. The proposal comes at a key time in the runup to the November midterm elections.

The president has repeatedly taken aim at oil and gas companies for what he claims are policies that prioritize profits at the expense of consumers. Last week, he called on refiners to ramp up output. The industry, for its part, says the White House has unfriendly policies, and they can't boost output even if they wanted to, citing issues like labor shortages.

The administration does not control gas prices. More than half of the cost per gallon of gasoline is based on the underlying price of oil, which is set on a global basis and has spiked above $100 per barrel.

Jason Furman, professor of economic policy at Harvard and former chair of the Council of Economic Advisers under President Barack Obama, said a suspension would have little impact on consumers while leading to billions of dollars for oil companies.

"When refineries are already stressed to capacity the additional demand that the gas tax holiday will unleash will manifest itself almost entirely in the form of higher prices for producers instead of savings for consumers," he said, before adding: "I don't think any expert thinks this is a remotely good idea."

Goldman Sachs' global head of commodities research, Jeff Currie, echoed this point, saying a gas tax holiday will ultimately lead to higher demand from consumers. An often-cited phenomenon for commodity markets is that the cure for high prices is high prices. Cutting prices is a temporary measure that won't address fundamental market imbalances.

The national average for a gallon of gasoline surged above $5 for the first time ever earlier this month. Prices have since retreated slightly, with the per-gallon national average at $4.955 on Wednesday. That's up 36 cents in the last month and $1.88 more than last year.

The federal gas tax has been 18.4 cents per gallon since 1993.

Biden calls on Congress to suspend the gas tax — Here's what that means for prices at the pump (3)

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President Biden calls on Congress to suspend federal gas tax

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Biden calls on Congress to suspend the gas tax — Here's what that means for prices at the pump (2024)

FAQs

Does the federal government have anything to do with gas prices? ›

It's that they have very little control over it. Yes, policies and legislation can certainly play a role, but gas prices are largely dictated by oil prices and oil prices are dependent upon supply and demand.

How much federal tax is in a gallon of gasoline? ›

The federal gas tax has been set at 18.4 cents per gallon of gasoline since 1993.

What is the federal gas tax relief bill? ›

Introduced in Senate (02/09/2022) This bill provides for a temporary exemption through 2022 from the excise tax on gasoline (other than aviation gasoline) and from the Leaking Underground Storage Tank Trust Fund financing rate.

What is the gas tax in the IRS? ›

Federal taxes include excises taxes of 18.3 cents per gallon on gasoline and 24.3 cents per gallon on diesel fuel, and a Leaking Underground Storage Tank fee of 0.1 cents per gallon on both fuels.

Who actually controls gas prices? ›

Petroleum prices are determined by market forces of supply and demand, not individual companies, and the price of crude oil is the primary determinant of the price we pay at the pump.

Who controls the oil prices? ›

Like most commodities, the fundamental driver of oil's price is supply and demand in the market. The cost of extracting and producing oil is also an important factor. Oil markets are composed of speculators who are betting on price moves, and hedgers who are limiting risk in the production or consumption of oil.

Which state has the highest gas tax? ›

Why it matters: California has the highest state excise tax on gasoline in the country, and the highest price of gas. Zoom in: The average cost of regular gas is $4.79 per gallon in California, and $4.83 in San Diego County, as of July 3, according to AAA. That's compared to $3.51 nationally.

Who benefits from the gasoline tax? ›

Federal and state governments levy gas taxes to help pay for road infrastructure projects. The average state gas tax is about 32.26 cents a gallon, though they range from less than 9 cents to almost 78 cents a gallon.

What state has the highest taxes? ›

In fact, the states with the highest tax in the U.S. in 2021 are:
  • California (13.3%)
  • Hawaii (11%)
  • New Jersey (10.75%)
  • Oregon (9.9%)
  • Minnesota (9.85%)
  • District of Columbia (8.95%)
  • New York (8.82%)
  • Vermont (8.75%)

When was the last time the federal gas tax was raised? ›

The federal gas tax of 18.4 cents per gallon (CPG) has not been increased since 1993 and at least eight states have gone longer.

How much profit on a gallon of gas? ›

Generally, the markup (or “margin”) on a gallon of gas is about 15 cents per gallon (gross profit before expenses). Factoring in expenses, which include rent, utilities, freight, labor and credit card fees, a retailer is left with about 2 cents per gallon in profit.

Will I get the gas tax refund? ›

To be eligible for a refund, the individual or business must use the gasoline as specified in Revenue and Taxation Code section 8101. For further details and specific eligibility requirements, refer to Part 2 of Division 2, of the Revenue and Taxation Code.

Why is there a federal gas tax? ›

The United States federal excise tax on gasoline is 18.4 cents per gallon and 24.4 cents per gallon for diesel fuel. Proceeds from the tax partly support the Highway Trust Fund. The federal tax was last raised on October 1, 1993, and is not indexed to inflation, which increased 111% from Oct.

How much do we pay for federal gas tax and state gas tax in cents gallon in California? ›

Now, the state's gas tax is 60 cents, whereas it was 58 cents from July 2023 to June 2024, according to the California Department of Tax and Fee Administration. This fee is on top of sales tax and the federal fuel tax for gasoline, which currently sits at 18 cents.

Why is California gas so expensive? ›

California requires a special blend of gasoline that reduces pollution — and costs more money. “California also has seen a drop of 66% in the amount of refineries in operation from where we were 40 years ago,” said Patrick De Haan, head of petroleum analysis for GasBuddy.

Why are gas prices so high in the US? ›

Crude oil, the key component in gasoline, accounts for more than half of the price, and oil prices have climbed so far this year, owing to supply limitations and geopolitical unrest, de Haan said. The U.S. West Texas Intermediate futures price has jumped 16% since Jan. 1, reaching $83 a barrel on Friday.

Does the government get money from gas sales? ›

Motor fuel taxes are taxes levied on gasoline, diesel, and gasohol (a mixture of ethanol and unleaded gasoline). State and local governments collected a combined $53 billion in revenue from motor fuel taxes in 2021. Most states levy per unit taxes based on how many gallons of gasoline a consumer purchases.

Does the government control oil prices? ›

A market based on expected supply and demand for hydrocarbons. Richard Joswick, Head of Global Oil Analytics at S&P Global Platts, agrees the price of oil and gas is not controlled. “It's market pricing,” and it depends mostly on supply and demand for the product.

Should the government set the price of gasoline? ›

It's been done before, typically during times of crisis, but for most mainstream economists, the answer to this question is a resounding “no.” Limiting how much companies can charge will distort markets, they argue, causing shortages and exacerbating supply chain problems while only temporarily reducing inflation.

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