Tue, August 09, 2022

international

'Yet another gimmick' - Biden's gas tax holiday plan met with skepticism


With U.S. President Joe Biden on Wednesday calling for a three-month suspension of the federal gasoline tax to combat record prices, experts and motorists are saying they're unimpressed, even as opposition from lawmakers within Biden’s own party suggests the tax hiatus may never go into effect.

American families paying much more for gasoline deserve some financial relief, Biden said as he pushed Congress to act while acknowledging that a suspension of the 18.4 cents per gallon tax was not enough.

Analyst Stephen Schork said the measure would have little effect.

The measure is "yet another gimmick being offered by a president who is clearly out of his depth when it comes to addressing the long-term structural imbalance between supply and demand in the energy markets," said Schork, the principal and co-founder of the Schork Group.

The president also urged states to temporarily suspend state fuel taxes, which are often higher than federal rates.

Biden and his advisers face increasing pressure to act as record-high gas prices and overall inflation weigh on his opinion poll ratings and cast doubt on Democrats' chances of retaining congressional power in the Nov.8 elections.

Virginia motorist Mike McGovern blamed Democrats for the spike in gas prices.

"It's the policies that are in place right now from the liberal side," said McGovern, who was interviewed by Reuters at an Alexandria gas station.

"We were pretty much energy independent before, and there's been a huge trend line worth of data to show where we've gone from and where we're now at. I think the policies definitely need to be adjusted and hopefully, this next election cycle will help trend in that direction," he added.

The administration says the main causes of high prices are the impact of Russia's invasion of Ukraine in February and oil companies reaping sky-high profits as gasoline demand rises with the worst of the COVID-19 pandemic apparently over. Oil companies complain that Biden's administration is unfairly vilifying the industry.

One Virginia motorist said the situation is complicated.

"I'm not necessarily blaming the Biden administration," said the woman, who preferred not to share her name.

"I know there are external factors. I mean, where we're importing our oil for the most part. So I guess reliance on that perhaps. But, yeah, I guess it's a complex issue."

A gas tax holiday is unlikely to lower overall inflation rates, some economists said and could threaten to undermine Biden's clean-energy and infrastructure goals.

A suspension of the 18.4 cents per gallon federal gasoline tax and 24.4 cent diesel tax would require congressional action.

Lawmakers in both parties have expressed resistance to suspending the tax. Some Democrats, including House of Representatives Speaker Nancy Pelosi worry oil companies and retailers may pocket much of the savings.

Energy secretary Granholm told reporters on Wednesday that a "conversation is ongoing" with Capitol Hill.

Biden asked Congress to suspend the fuel tax through September to alleviate prices during the United States' summer driving season. The move will cost the Highway Trust Fund roughly $10 billion in foregone revenue but could be made up from other areas of a budget as tax revenues grow and deficits shrink emerging from the pandemic.

The president also urged states to temporarily suspend state fuel taxes, which are often higher than federal rates.

Some states, such as New York and Connecticut, have already paused state fuel taxes, while others have floated ideas such as consumer rebates and direct relief.

"That's a much bigger piece of the pie because the national average state tax on gasoline is $0.57 a gallon," said Stephen Schork.

Longer-term policies are still needed, experts say.

"I think if it does pass, it will come and go and won't really have much impact, except in terms of symbolically and in terms of headlines," said Daniel Yergin, the vice-chairman of S&P Global.

Published : June 23, 2022

By : Reuters