Biden will call for 3-month suspension of gas tax, though officials acknowledge it ‘alone won’t fix the problem’ & More news

 

Biden will also call on states to take steps removing their own taxes on gas and diesel. And he’ll tell oil refining companies to increase their capacity ahead of their planned meeting this week with administration officials.

Combined, the senior administration officials claimed, the steps Biden will call for could reduce the price per gallon of gas by $1. Yet that figure relies on a number of steps entirely out of the President’s control — not least of which is convincing a skeptical Congress to approve his plan.

The steps amount to Biden’s latest attempt to show he’s taking initiative in reducing fuel prices as Americans grow more frustrated by the financial burden. White House officials had been considering a gas tax holiday for months, but held off until now in part because of concerns at how it might be received in Congress.

Republicans widely oppose lifting the gax tax. Even some Democrats, including House Speaker Nancy Pelosi, have been cool on the idea. And in the past, senior Democrats — including President Barack Obama on the campaign trail in 2008 — have cast a gas tax holiday as a “gimmick.”

Yet facing growing anger and the start of the summer driving season, Biden determined that even small steps bordering on symbolic are worth taking.

“A federal gas tax suspension alone won’t fix the problem we face, but it will provide families a little breathing room as we continue working to bring down prices for the long haul,” one senior administration official told reporters.

The current federal tax on gas is about 18 cents per gallon, while the federal tax on diesel stands at 24 cents per gallon. Even if savings from lifting those taxes were passed directly to consumers — which isn’t guaranteed — the savings for one fill-up could only be a few dollars.

Biden is expected to back federal gas tax holiday as he ramps up criticism of oil industry amid soaring prices
Even some Democrats have cast doubt previously on a gas tax holiday, noting that the tax provides an important source of funding for road construction. Officials said Biden would call for using other revenue sources to make up for the shortfall, and he worked to allay some of those concerns on Tuesday.

“Look, it will have some impact, but it’s not going to have an impact on major road construction and major repairs,” he told reporters.

Economists skeptical

Some economists also say that the savings passed along to consumers could be minimal as retailers simply raise the base price of gas to make up the difference.

“Whatever you thought of the merits of a gas tax holiday in February, it is a worse idea now,” Jason Furman, a senior economic official in Obama’s administration, wrote on Twitter. “Refineries are even more constrained now so supply is nearly fully inelastic. Most of the 18.4 cent reduction would be pocketed by industry — with maybe a few cents passed on to consumers.”

The senior administration official acknowledged that criticism and said Biden “is absolutely calling on companies to make sure that those savings are passed through to consumers.” But officials did not say specifically how Biden might ensure drivers benefit from the savings.

One official acknowledged that simply suspending the tax “isn’t going to solve the whole problem.”

“It is something that can be done to take a real step to relieve some of that pain at the pump, and we see it as part of a suite of policies that are designed to provide that relief, including policies that focus on the supply side,” the official said.

Yet even there, quick action seems difficult. Refining capacity that was cut during the Covid-19 pandemic would take months to get back online, and refineries now are running at nearly 90% of their capacity.

“We’re certainly approaching it in constructive, actionable, pragmatic ways. I again think the American people would want their leaders to do so,” a second senior administration official said, noting Thursday’s meeting with seven top executives and Energy Secretary Jennifer Granholm.

Biden looks for scapegoats

The President has turned up the heat on oil and gas companies in recent weeks as gas prices have shot up, with the national average climbing above $5 per gallon at one point last week.

Biden has made Russia’s war in Ukraine his top scapegoat for climbing gas prices but has also called out oil and gas companies, saying they aren’t doing enough to bring down costs and accusing them of profiting off the war. He repeated some of those arguments on Tuesday, saying the country needs “more refining capacity.”

“This idea that they don’t have oil to drill and to bring up is simply not true,” he said.

In response to the President’s criticisms, the oil industry has largely said that it is the Biden administration’s fault that prices are so high because of what they perceive as limits on domestic oil and gas production.

Chevron CEO Mike Worth said in a letter on Tuesday that Biden should stop criticizing the oil and gas industry and called for a “change in approach” from the White House.

“Your Administration has largely sought to criticize, and at times vilify, our industry,” Worth wrote in an open letter to Biden. “These actions are not beneficial to meeting the challenges we face and are not what the American people deserve.”

Biden responded later in the day: “He’s mildly sensitive,” adding: “I didn’t know they’d get their feelings hurt that quickly.”

 

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