President Joe Biden on Wednesday called on Congress to suspend federal gasoline and diesel taxes until the end of September, framing the move as necessary to provide relief to American consumers but itself not enough to resolve the problem of surging energy prices.
Biden’s decision to call for a federal gas tax holiday – a move once derided as a gimmick by Barack Obama and viewed skeptically by leading economists – almost certainly won’t make it through Congress, especially as it faces blowback from the President’s own allies on Capitol Hill. House Speaker Nancy Pelosi stopped short of endorsing the plan in a statement after Biden’s remarks.
But he cast the move as a way to give some relief to families as he tries to find solutions to one of his top political problems.
“By suspending the 18-cent gas tax, federal gas tax for the next 90 days, we can bring down the price of gas and give families just a little bit of relief,” Biden said in a speech from the White House.
“I fully understand that a gas tax holiday alone is not going to fix the problem,” he continued, “but it will provide families some immediate relief, just a little bit of breathing room as we continue working to bring down prices for the long haul.”
Biden also called on states to take steps removing their own taxes on gas and diesel. And he told oil refining companies to increase their capacity ahead of their planned meeting this week with administration officials.
Combined, Biden claimed, the wish list 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.
In her statement after Biden’s remarks, Pelosi did not commit to bringing a gas tax holiday up for a vote.
“We will see where the consensus lies on a path forward for the President’s proposal in the House and the Senate,” she wrote.
The steps amounted 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 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.
“In the conditions that we are in today, that’s not a gimmick, that’s a little bit of breathing room for the American people as we get into the summer driving season,” said Amos Hochstein, senior adviser for energy security at the State Department, in an interview on CNN’s “New Day” Wednesday morning.
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.
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 in his speech.
He also sought to use the occasion to explain his decisions that have contributed to higher gas prices. The President defended banning Russian energy imports to the US after Russian President Vladimir Putin invaded Ukraine – a move Biden acknowledged at the time would raise gas prices. Imports from Russia make up a small slice of the American energy portfolio, roughly 8% in 2021, of which only about 3% was crude oil.
“We could have turned a blind eye to Putin’s murderous ways, and the price of gas wouldn’t have spiked the way it has. I believe that would have been wrong,” Biden said. “I believed then and believe now that the free world had no choice.”
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.”
Senior administration officials have acknowledged that criticism, but said Biden would pressure companies to pass along the savings.
“There’s no time now for profiteering,” Biden said, adding later that energy companies must increase refining capacity to produce more gas for American consumers and bring down prices.
“To the companies running gas stations and setting those prices at the pump – this is a time of war, global peril, Ukraine. These are not normal times,” he said. “Bring down the price you are charging at the pump to reflect the cost you are paying for the product.”
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.
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.”