Gas tax holiday: How much could Americans really save?
President Biden asked Congress to suspend the federal gas tax to ease prices at the pump. Here’s what critics have to say about the proposed policy.
Just the FAQs, USA TODAY
- President Joe Biden’s approval ratings have tanked as gas prices and inflation have soared.
- Energy analysts say the price of oil, not Biden or his policies, are to blame for higher gas prices.
- Gas prices are higher in 93 countries than they are in the United States.
WASHINGTON – Five-dollar-a-gallon gas isn’t a good deal in the United States, but in other parts of the world, it’s a bargain.
Drivers in Hong Kong pay over $11 a gallon at the pump. Filling up in Finland costs over $10 a gallon. In Iceland, Norway, Greece, Denmark, the Netherlands, Monaco and the Central African Republic, the price of petrol tops $9 per gallon.
In fact, compared to the rest of the world, the U.S. is in the middle of the pack when it comes to gas prices – even as inflation takes its toll on the American economy. Prices are higher in 93 countries and cheaper in 74 others, according to an analysis by GlobalPetrolPrices.com, which tracks the retail prices of motor fuel across the globe.
That may not be much consolation for President Joe Biden, whose approval ratings have tanked as petrol prices have spiked and inflation has soared. Four in 10 Americans blamed Biden and his policies for higher gas prices in a Quinnipiac University poll in March.
But energy analysts say the rising cost of oil is fueling gas prices across the globe and at home, not Biden or his policies. How can the president of the United States be responsible for $8-a-gallon gas in France?
“He has no real effect on world oil prices,” said Christopher Knittel, an energy economist at the Massachusetts Institute of Technology.
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Biden has taken several steps to try to give Americans relief from gas prices, which on Thursday averaged $4.94 a gallon nationwide but stood at over $5 a gallon in more than a dozen states, according to AAA.
Biden has released over 180 million gallons of oil from the nation’s emergency reserves, called on Congress to suspend the federal gas tax for three months and tried to cajole energy companies into boosting oil production.
On Thursday, Energy Secretary Jennifer Granholm held an emergency meeting in Washington with executives from seven major oil companies to explore solutions to sky-high gas prices.
Granholm reiterated Biden’s call for them to do more to ensure that their companies are passing savings onto their customers and directed her team to continue working with the companies to pursue solutions to supply and price challenges, her office said in a statement.
In reality, there’s not much Biden can do to lower prices at the pump, Knittel said.
“Even the things he has already done and has suggested are short-term, marginal impacts on the price of gasoline,” he said. “It’s hard for Americans to see this, but the world market is so big and so vast, it’s hard for even a big country and an economic powerhouse like ourselves to have a large impact” on prices.
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Oil prices impact the cost of gas across the globe, and the price of crude has surged to over $110 per barrel since Russia’s invasion of Ukraine in February. Whenever oil prices jump, “you’ll see gas prices in just about every country increase, except for those that actually administratively keep their prices at a predetermined level,” Knittel said.
Gas prices can vary widely across the world. But in general, richer countries have higher prices while poorer countries and those that produce and export oil have significantly lower prices, according to GlobalPetrolPrices.com.
Gas prices in the U.S. are driven by the market. But in some countries, oil companies are owned by the state, which provides fuel subsidies to keep gas prices low or prevent price fluctuations. In Venezuela, Iran and Libya, all of which offer fuel subsidies, gas costs less than $1 per gallon.
Any country that sells gas for less than $2 per gallon is subsidizing it, said Neven Valev, owner of GlobalPetrolPrices.
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Dirt-cheap gas prices may be good for consumers but can lead to other problems. In Venezuela, “we see how that’s gone for them,” said Patrick De Haan, head of petroleum analysis at GasBuddy, which tracks the price of fuel. “Infrastructure is failing left and right because of a lack of revenue. When you charge vastly under-market rates, it’s hard to keep up infrastructure.”
Taxes are the biggest reason for the wide variation in global gas prices. In the United States, the federal gas tax is 18.4 cents per gallon, and state gas taxes average about 30 cents a gallon. So when a motorist pays $5 per gallon at the tank, roughly 50 cents of that cost is in taxes.
Many other countries impose higher gas taxes. In Hong Kong, which tries to discourage people from driving, the gas tax can run as high as $6 per gallon. European Union countries are required to levy a minimum excise tax of $1.55 per gallon on gas in hopes of steering more people to take mass transit.
“They’re trying to keep cars off the road by disincentivizing people to have a car,” De Haan said.
While current gas prices are not Biden’s doing, his administration has aggravated matters by villainizing the energy industry and pursuing policies that limited oil production and injected uncertainty into energy markets, De Haan said.
“That’s not doing a credit to anyone,” he said.
Michael Collins covers the White House. Follow him on Twitter @mcollinsNEWS.
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