By Lauren Fix, The Car Coach
Could gas prices get any higher?
Yes, they can and it is expected that gas and diesel prices will continue to increase.
Federal officials are looking for ways to reduce pain at the pump as gas and diesel prices continue to soar. As Americans get ready for a busy July 4th and summer vacation travel, all drivers need some relief at the pump. President Biden has asked Congress to place a three-month pause on the federal gasoline and diesel taxes.
The 18.4-cent federal gas tax, which helps fund infrastructure work, could be dropped if Congress votes to approve it. This money is just a small amount of what consumers pay for a gallon of gas and that is often eclipsed by state gas taxes, which are typically much higher. This three-month pause would also reduce diesel by 24.4-cent per gallon. Even if both taxes are dropped, gasoline prices will not dip below $4 per gallon.
Congressmen on both sides are not likely to agree on this and reject the White House effort to suspend the federal gasoline tax.
Why would they do this to us? There is more to this than what’s on the surface.
The big question is why the gas tax relief will not work. Firstly, it wouldn’t solve the problem of rising fuel prices, it would just put a temporary Band-Aid on the problem. Secondly, it could contribute to inflation. The gas tax holiday will have to be reversed in three months and prices will be higher.
The Biden administration wants to implement this cut to the federal gas tax for 90 days beginning in July 2022. Is this a gimmick or a political ploy?
The underlying problem is the supply. If you artificially lower prices, demand will increase and drivers will drive more. To lower prices, increasing supply makes the most sense. However, we are no longer energy independent. Overseas, OPEC and OPEC+ are producing more oil but the price is higher. Both political sides agree that this is short-term savings and not that much in savings in the long run.
Looking at a gallon of gas, here is what we pay for:
- 12 percent is taxes
- 11 percent for distribution and marketing
- 17 percent in refining
- 60 percent is crude oil costs.
What are the real savings to you?
The federal gas tax is a flat 18.4-cents per gallon for gasoline and 24.4-cents per gallon for diesel. That makes it simple for drivers to figure out exactly how much they’ll save from the tax cut if it is passed. An average size compact SUV, such as a Toyota RAV4 non-hybrid would save about $23; a Honda Civic would save about $19.10; and a Ford F-150 would save about $35.50–over the course of the three-month period.
I understand that every dollar counts. Once the tax holiday ends prices will return to the higher prices and most likely higher than where they are today.
Another factor to consider: The gas tax holiday would deprive the highway trust fund of an estimated $10 billion in tax revenue. The government has to keep up the road maintenance. Our roads and bridges are in need of repair, and this loss of revenue would be made up by taxing people in other ways to pay for this cost. So “you can pay me now or pay me later.”
The Bottom Line
The Biden administration has already tried a variety of measures intended to drive down costs, including opening up the American Strategic Oil Reserve and allowing a 15 percent ethanol blend of gasoline year-round. We have discussed this before, including the damage to many vehicles and possibly voiding your engine’s warranty. Regardless, the impact of including an ethanol blend hasn’t had a measurable effect on fuel prices.
Now the answer to the question–is this a gimmick?
There are good intentions behind the idea, but the impact on drivers, in the end, will cost everyone more at the pump because we are not solving the problem at all. Cutting prices for three months will not create the systemic conditions we need to stabilize the energy prices and demands.
There is so much more to discuss on this. Place your comments below and let’s start the conversation.
Lauren is the CEO of Automotive Aspects and the Editor-in-Chief of Car Coach Reports, a global automotive news outlet. She is an automotive contributor to national and local television news shows, including Fox News, Fox Business, CNN International, The Weather Channel, Inside Edition, Local Now News, Community Digital News, and more. Lauren also co-hosts a regular show on ABC.com with Paul Brian called “His Turn – Her Turn” and hosts regular radio segments on USA Radio – DayBreak.
Lauren is honored to be inducted into the Women’s Transportation Hall of Fame and a Board Member of the Buffalo Motorcar Museum and Juror / President for the North American Car, Utility & Truck of the Year Awards.
Check her out on Twitter and Instagram @LaurenFix.
Editor’s Note: The opinions expressed in this article are those of the author.
