President Biden asked Congress on Wednesday to lift the federal fuel tax for three months in a bid to reduce excessively high prices at the pump, but resistance in Congress—even from the President's own party—could stymie the idea altogether.
In a four-point plan, Biden said told legislators to consider suspending the $0.24 federal tax per gallon of diesel and the $0.18 per gallon tax on gasoline for 90 days and recommended that states also lift their state taxes on fuels.
The President also called on oil companies to use their profits to boost refining capacity and on fuel retailers to pass on the reduction in prices resulting from the potential lifting of federal taxes to customers.
"I fully understand that a gas tax holiday alone is not going to fix the problem but it will provide families some immediate relief, just a little bit of breathing room, as we continue working on bringing down prices for the long haul," Biden said, as quoted by Reuters.
But Congress has expressed a lack of enthusiasm for any such gas tax holiday.
"We will see where the consensus lies on a path forward for the President's proposal in the House and the Senate," House of Representatives Speaker Nancy Pelosi said in what was interpreted as a rare lack of endorsement for the President's proposal.
Other Democratic lawmakers—including Speaker Pelosi—suggested that the gas tax savings could be pocketed by oil companies rather than the consumer.
Yet another criticism of the gas tax holiday is that it would strip funds out of the Highway Trust Fund that is earmarked for maintaining roads, bridges, and other infrastructure.
The administration is blaming the high fuel prices on Russia's invasion of Ukraine and the windfall profits of oil companies resulting from the crude oil price rally, itself a result of an imbalance between supply and demand.
U.S. refining capacity has shed more than 1 million bpd over the past two years, according to the Energy Information Administration, but, according to federal data cited by Seeking Alpha, the decline has been going on for much longer.
Since 1990, the data shows, some 86 refineries have been shut down in the U.S., translating in the loss of more than 5 million bpd in capacity.
U.S. oil producers, meanwhile, have been reluctant to boost production, prioritizing instead the return of cash to shareholders.
ADVERTISEMENT
By Charles Kennedy for Oilprice.com
More Top Reads From Oilprice.com:
- China May No Longer Be A Pillar Of Growth For Global Oil Markets
- 4 Nations That Could Help Solve The Global Fuel Crisis
- Europe Faces “Red Alert” For Gas Supply As Russia Reduces Flows
