America’s struggling drivers may be about to get a vacation. On Wednesday, Joe Biden called on Congress to suspend the federal tax on gasoline and diesel through September as the country struggles with soaring gas station costs. But experts cautioned that the tax break is unlikely to have a major impact on prices and will likely further damage America’s already battered roads and bridges. If the tax reduction is approved.
Blaming the Russian invasion of Ukraine for rising gasoline prices, Biden has proposed cutting federal taxes from 18 cents a gallon on fuel through September and called on states to lower their gasoline taxes as well. “Together, these actions could help bring the price at the pump down to $1 a gallon or more. It doesn’t reduce all the pain, but it will go a long way,” Biden said.
The first tax cut hurdle may be the last. Senate Republican Leader Mitch McConnell called the plan an “ineffective stunt” and other critics in your own party he can join Republicans in blocking any cuts.
But with prices still on the rise and the midterm elections looming, the administration is increasingly looking for ways to save the public on pump prices, which currently average just under $5 a gallon.
The nonpartisan Tax Foundation called the plan “exceptionally inappropriate policy to deal with rising prices. Pointing out that the tax money is the primary funding source for the construction of highways and their suspension could cost 10,000 million dollars in financing.
“Anything that can help the price at the pump is good, but it will come at a significant cost to the federal government which is supposed to use that highway fund money to maintain the roads,” said Mark Finley, fellow at global oil and energy. at the Center for Energy Studies at Rice University.
US energy economists also warn that cutting gasoline taxes (a similar program has been suggested in the UK and other countries) does not address the fundamental problems of high demand.
in a february reportThe Committee for a Responsible Federal Budget found that an exemption from the federal gas tax could “further increase demand for gasoline and other goods and services at a time when the economy has little capacity to absorb it.”
“Gasoline prices are high because supply and demand are tight in the US and around the world, both for oil and for refined products. Prices are a signal that producers should produce more and consumers should consume less. You don’t fix the problem and you can exacerbate it if you try to hide those signs,” Finley said.
In addition, prices may rise when the tax is lifted, according to a to study released from the Wharton School of the University of Pennsylvania. Earlier this year, Maryland introduced a one-month gasoline tax moratorium. The study found that prices rose when it expired and the tax may have cost the state $100 million.
Other states have tried similar measures. New York suspended its 16-cent-per-gallon tax this month for the rest of the year. Others, including Georgia, Florida and Connecticut, are cutting the tax but for shorter periods. California can send $400 to each owner of a registered vehicle.
The energy price debate threatens to become one of the most contentious of the election season. This week Exxon Mobil said global oil markets may remain tight for another three to five years, largely due to a lack of investment since the pandemic began. Biden has responded to rising prices at the pump, and a decline in his approval rating, by pressing OPEC+ countries, which includes Russia, to speed up production increases.
Biden will travel to Saudi Arabia next month to ask the kingdom to turn on the taps. But studies indicate that the Saudis themselves are at the limit of their current capacity. The venture comes at a political cost, undermining the administration’s commitment to renewable energy and an election promise to turn Saudi Arabia into a “rogue” state after the assassination of Washington Post journalist Jamal Khashoggi.
Other measures the administration has undertaken to reduce energy costs, including the release of millions of barrels of crude oil from the strategic petroleum reserve and higher ethanol blendhave not changed the course of price increases.
According to Ed Hirs of the economics department at the University of Houston, Biden’s actions, including a severe letter Refineries to produce more gasoline and diesel will not prevent the average price at the pump from reaching $6 in September.
The energy debate has in a sense been misframed, Hirs said. “We don’t see lines at the pump, there’s no shortage of oil, all we see is a higher price and that’s essentially because OPEC wants a higher price,” says Hirs.
The message to the American consumer is equally strong. After 2008, when oil hit $147 a barrel, US automakers had to accept government bailouts as consumers turned away from gas-guzzling SUVs and pickup trucks.
“If the war in Ukraine continues, we could easily see the same thing by this time next year,” Hirs predicted. “We have to think about this in a different way. Many people in the West think that we have a right to gasoline and diesel, in the same way that we have a right to iPhones. But we haven’t operated the economy that way.”
Put plainly, there is little the administration can do. “We’ve reached a point where gasoline, diesel and crude oil supplies are below our five-year averages, so it looks like we’ve been exporting as much as we can,” Hirs said. “As long as the conflict persists, really between the US and Russia, the EU nations will be additional buyers. So the guy in London looking to fill his car and the woman in France are racing someone on I-95.”
Reference-www.theguardian.com