ATA, some economists cool on President Biden’s fuel tax ‘holiday’ proposal

When it comes to fuel prices, President Joe Biden is like a basketball player at halfcourt with time ticking down and his team losing. Throwing up a prayer is better than watching time expire, according to the president.

“I fully understand the gas tax holiday alone is not going to fix the problem,” Biden said in remarks from the White House. “But it will provide families some immediate relief, give them a little bit of breathing room, so we continue working to bring down prices for the long haul.”

The idea could be a non-starter in Congress. And in another further precarious political move, Biden is calling on states to join in the fuel tax holiday. Some states—such as Connecticut, Florida and New York—are planning such breaks. Maryland, with a lame-duck Republican governor, briefly suspended its 37-cent state fuel tax for 30 days in the spring. Considering 28 states have Republican governors, Biden’s proposal could be a non-starter in some red states.

Biden’s idea to propose a 90-day “holiday” from collection of federal tax on fuels—currently 24.4 cents a gallon on diesel and 18.4 cents on gasoline—was met with a barrage of criticism from the trucking industry, which is panning the idea.

When one of the largest collective consumers says the idea of a federal and state tax “ldquo;holiday”—that at most would lower diesel by 60 cents a gallon and gasoline by perhaps 50 cents—is a bad idea, maybe Biden should consider a Plan B.

American Trucking Associations President and CEO Chris Spear called on leaders in Washington to get serious about lowering energy prices and reducing inflation rather than considering a proposal to temporarily suspend the federal fuel tax:

“After months of touting the passage of the well-funded Infrastructure Investment and Jobs Act—a much-needed investment in our nation’s roads and bridges—the Biden Administration wants to cut that same highway system’s primary source of funding with a suspension of the federal fuel tax,” Spear said in a strongly worded statement.

Biden disputes that a gas tax holiday would make it difficult to pay for major infrastructure projects. “We have plenty of capacity to do that,” Biden said at an impromptu press gathering. A decision on the idea is expected by the end of the week.

But ATA’s Spear isn’t waiting. He’s offering up three “immediate” things the Biden administration and Congress can do that will actually make a difference in the supply and price of diesel and gasoline:

• Make America energy independent by encouraging greater domestic oil productivity and refining capacity;
• Stop “kissing the ring of Saudi Arabia,” Spear said.  The U.S. can put pressure on the Saudis by renewing trade agreements with the European Union and Asian Pacific nations to export more American oil and natural gas; and
• Balance the budget. Stop wasting hard-earned taxpayer dollars on senseless programs that drive up inflation and runaway deficits, Spear said.

“Energy independence, trade and a balanced budget,” Spear added. “Do that, and America wins.”

Even economists are split on the idea while environmentalists are generally against it, and would favor a greater reliance on “clean” fuels and electric vehicles, which are not practical yet in long-haul trucking.

Besides, some economists said, the gas tax holiday idea could backfire and spur some drivers to drive more, thus further reducing gasoline inventories.

“It’s hard to see what Biden thinks he will gain by this announcement,” Capital Alpha Partners’ James Lucier said in a note to investors per Marketwatch. “The market is calling for demand destruction. Lowering the price when supplies are tight will only lead to demand creation. There is no guarantee that cost savings will be passed on to consumers; in fact, the dynamics of pricing power in a competitive commodity market suggest that it won’t be.”

‘‘It’s not the best idea,” Jeff Currie, global head of commodities research for Goldman Sachs, told CNBC. “It’s bullish for energy prices because it’s reducing the price to the consumer. And the law of demand says they’re going to consume more if you take down the price.”

The fuel tax suspension would require Congressional action, which in Washington during the summer “is exceedingly unlikely,” Tobin Marcus, a policy and politics strategist at Evercore ISI, said in a note to investors.

Marcus is hardly a Biden enemy. He worked for Biden when he was vice president under Barack Obama in the earlier part of this century.

He said this “politically oriented” proposal that will not get passed in Congress. It’s further evidence the White House—and politicians in general—have little genuine impact on the world fuel markets.

The nationwide price of gasoline was $5.00 a gallon, according to the Department of Energy’s on-highway index. That’s up $1.93 from a year ago. Diesel prices averaged $5.72 a gallon, up $2.43 from a year ago. But in perhaps the best news of the week, worldwide crude oil prices fell to a five-week low of just under $106 a barrel.