Biden calls for a three-month suspension of the federal gas tax, but faces long odds of joining Congress

Biden’s decision to call for a federal tax relief on gas — a move once derided as a gimmick by Barack Obama and viewed with suspicion by prominent economists — will almost certainly not make it to Congress, especially as it faces a backlash from the president’s allies. On Capitol Hill. House Speaker Nancy Pelosi declined to endorse the plan in a statement after Biden’s comments.

But he saw the move as a way to give the families some relief as he tried to find solutions to one of his biggest political problems.

“By suspending the 18-cent gas tax, the federal gas tax for the next 90 days, we can lower the price of gas and give families a little relief,” Biden said in a speech from the White House.

“I fully understand that the gas tax credit alone will not solve the problem,” he continued, “but it will provide families with some immediate relief, just a little breathing space as we continue to work to bring prices down for a long pull.”

Biden also called on states to take steps to eliminate their taxes on gas and diesel. He asked oil refiners to increase their capacity before their planned meeting this week with administration officials.

Biden claimed that the combined wish list could lower the price of a gallon of gas by $1. However, that number depends on a number of steps completely outside the president’s control — not the least of which is persuading a skeptical Congress to agree to his plan.

In her statement after Biden’s remarks, Pelosi did not commit to bringing a gas tax exemption to the vote.

“We’ll see where the consensus lies on the way forward for the president’s proposal in the House and Senate,” she wrote.

These steps amount to Biden’s latest attempt to show he is taking the lead in lowering fuel prices as Americans grow frustrated with the financial burden. White House officials have been considering a gas tax exemption for months, but have so far been put off in part by concerns about how it will be received in Congress.

Republicans are broadly opposed to raising the GAX tax. Even some Democrats — including President Barack Obama during his 2008 campaign — considered the gas tax credit a “gimmick.”

However, in the face of mounting anger and the onset of the summer driving season, Biden decided that even small steps approaching symbolism were worth making.

“In the circumstances we are in today, this is not a gimmick, it’s a little breathing room for the American people as summer driving season enters,” said Amos Hochstein, the State Department’s senior energy security adviser. In an interview with CNN “The New Day” Wednesday morning.

The current federal tax on gas is about 18 cents per gallon, while the federal tax on diesel is 24 cents per gallon. Even if the savings from raising these taxes were passed on directly to consumers—which is not guaranteed—the savings for a single fill-up could be just a few dollars.

Biden expected to support federal gas tax exemption as he steps up his criticism of the oil industry amid rising prices
Even some Democrats previously questioned A Gas tax exemptionNoting that the tax provides an important source of financing for road construction. Officials said Biden would advocate the use of other revenue sources to make up the shortfall, and worked to allay some of those concerns in his speech.

He also sought to take advantage of the occasion to explain his decisions that contributed to the rise in gas prices. The president defended a ban on Russian energy imports to the United States after Russian President Vladimir Putin’s invasion of Ukraine — a move Biden acknowledged at the time would raise gas prices. Imports from Russia make up a small segment of the US energy portfolio, about 8% in 2021, of which only about 3% is crude oil.

“We could have turned a blind eye to Putin’s murderous tactics, and the price of gas wouldn’t have gone up as high as it was,” Biden said. “I think that would have been a mistake.” “I believed then and I believe now that the free world has no choice.”

Skeptical Economists

Some economists also say that the savings passed on to consumers can be negligible because retailers simply raise the base price of gas to make up the difference.

“Regardless of the benefits of the February gas tax credit, it’s a worse idea now,” Jason Furman, the Obama administration’s senior economic official, wrote on Twitter. “Refineries are more constrained now, so supply is almost completely inelastic. Most of the 18.4 percent reduction will be won by the industry – with perhaps a few cents passed on to consumers.”

Senior administration officials acknowledged the criticism, but said Biden would pressure companies to pass on the savings.

“There is no time now to win,” Biden said, adding later that energy companies should increase refining capacity to produce more gas for American consumers and lower prices.

“For the companies that run gas stations and set those prices at the pump – this is a time of war, a global danger, Ukraine. These are not normal times,” he said. “Reduce the price you charge at the pump to reflect the cost you pay for the product.”

However, even there, quick action seems difficult. Refining capacity cut-off during covid-19 pandemic It would take several months to get online, and the refineries are now operating at nearly 90% of their capacity.

Biden is looking for a scapegoat

The president has heightened tension on oil and gas companies in recent weeks as gas prices have soared, with the national average rising above $5 a gallon at some point last week.

Biden made Russia’s war in Ukraine a scapegoat for high gas prices, but he also called on oil and gas companies, saying they weren’t doing enough to cut costs and accusing them of profiting from the war. He repeated some of those arguments on Tuesday, saying the country needed “more refining capacity”.

“The idea that they do not have oil to explore and extract is simply not true,” he said.

In response to the president’s criticism, the oil industry has largely said the Biden administration’s fault is that prices are too high because of what they see as restrictions 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 discredit, our industry,” Worth wrote in an open letter to Biden. These actions are not helpful to meet the challenges we face and are not what the American people deserve.

“He’s kind of sensitive,” Biden responded later in the day, adding, “I didn’t know they were going to get hurt so quickly.”