Will suspending gasoline & diesel taxes help much?

[dan_s]

Answer: Probably not and the idea may not get passed by congress anyway? IMO it is just more "political noise" in a series of moves to raise approval ratings.
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Newsmax.com:
U.S. President Joe Biden on Wednesday called on Congress to pass a three-month suspension of the federal gasoline tax to help combat record pump prices and provide temporary relief for American families this summer.

The president also urged states to temporarily suspend state fuel taxes, which are often higher than federal rates, the official said, and will challenge major oil companies to bring ideas on how to bring back idled refining capacity when they meet with his energy secretary later this week.

Biden and his advisers have been discussing the issue for months amid increasing pressure to act as record-high gas prices weigh down the president's poll ratings and cast a dark cloud over Democrats' chances of retaining congressional power in November's elections.

A suspension of the 18.4 cents per gallon federal gasoline tax and 24.4 cent diesel tax would require congressional approval, likely making Biden's pitch largely symbolic.

Lawmakers in both parties have expressed resistance to suspending the tax, with some Democrats, including House of Representatives Speaker Nancy Pelosi, worried the move could have limited effect on prices if oil companies and retailers pocket much of the savings.

"A gas tax holiday alone will not, on its own, relieve the run up in costs that we’ve seen," the White House said in a statement. "This unique moment when the war in Ukraine is imposing costs on American families, Congress should do what it can to provide working families breathing room." < Some truth, but blaming Putin for the supply shortages caused by the The Green Bad Deal is getting old.

Biden is asking Congress to suspend the fuel tax through September, a move that will cost the Highway Trust Fund roughly $10 billion in forgone revenue but could be made up from other areas of a budget that is seeing revenue grow and deficits shrink as the United States emerges from the COVID-19 pandemic, it added. < Do any of you think the revenues can be made up from other areas?

Some states, such as New York and Connecticut, have already paused state fuel taxes, while others have floated ideas such as consumer rebates and direct relief.

Refiners are struggling to meet global demand for diesel and gasoline, exacerbating high prices and aggravating shortages.

"Pausing the federal gas tax will certainly provide near-term relief for U.S. drivers, but it won’t solve the root of the issue – the imbalance in supply and demand for petroleum products," a spokesperson for the American Fuel and Petrochemical Manufacturers industry group said, adding longer-term policies are still needed to boost U.S. energy production.

U.S. pump prices are near $5 a gallon as soaring demand for motor fuels coincides with the loss of about 1 million barrels per day of processing capacity. In the last three years many refiners were closed when fuel demand cratered at the height of the COVID-19 pandemic.

[KGardiner]

Currently the average gas tax nationwide per gallon is about $0.50 including Federal, State and Local Taxes. Imposing an across the board tax holiday would cut the pump price from $5.00 to $4.50. This would likely increase demand by about 1%. Such an increase in crude demand (ignoring the limits of refinery capacity) would boost crude prices about perhaps 5% for a net pump price of $4.65.

I find it hard to believe this will make much difference since we are below 25 days of US commercial crude inventory.
We are losing about 0.5 days of inventory per month despite the SPR draws.
Based upon the inventory and price trends, the price of crude is rising about $4 per month.

This political fig leaf of action will be totally undone within 1-2 months.
Only sustained higher prices and a halt to brow beating producers and refiners will correct the problem.

Kevin

[dan_s]

Kevin:
You are 100% correct.
What Biden is doing is political noise.

For all commodities (especially oil) supply and demand can only be rebalanced by adding more supply or lowering demand. There are few near chances for increasing demand and in most of the OPEC countries there is significant risk of supply outages (i.e. - Libya). Obviously, Russian oil supply will be falling. Lowering gasoline prices by eliminating all taxes (highly unlikely to pass anyway) will increase demand and prolong the supply/demand imbalance.

Hurricanes entering the Gulf of Mexico will send gasoline and diesel prices a lot higher. Shortage of refining capacity and heavy oil needed to make diesel are the really big problems.

[Fraser921]

His handlers figure he wins either way

If it gets shot down, he can claim he is working hard to reduce prices

to answer your question, how to cover shortfall, windfall profit tax.

If i was an E & P company , and they pass that tax, I would suspend all drilling on the day of announcement.