In the face of rising prices for petrol or gas – which currently average $4.98 a gallon ($1.32 per litre) in the United States, according to the American Automobile Association (AAA) – US President Joe Biden has said that he may issue a federal holiday on the gasoline tax.
A temporary suspension or reduction of that tax, which Biden said he was considering on Monday, could save US drivers about 18.4 cents a gallon.
“Yes, I’m considering it,” Biden told reporters after taking a walk along the beach near his vacation home in Delaware. “I hope to have a decision based on the data — I’m looking for by the end of the week.”
Petrol prices have jumped up since Russia invaded Ukraine earlier this year, and critics have said that oil companies are keeping prices high to boost skyrocketing profits.
President Biden has made that argument himself, and has said that members of his team will meet with the leaders of several oil companies to discuss rising prices this week. “I want an explanation for why they aren’t refining more oil,” Biden said.
According to an Ipsos poll from April 2022, half of the respondents said that high gas prices had resulted in financial hardship. Respondents primarily blamed Russian President Vladimir Putin and oil companies for the high prices.
According to the Associated Press, the Biden administration has boosted ethanol blending, released oil from US strategic reserves, and urged oil refiners to heighten their refining capacity. Biden has called on states such as Saudi Arabia to increase production, and in early June the Organization of the Petroleum Exporting Countries (OPEC) announced an increase in output.
Such efforts, however, have not yet succeeded in lowering gas prices. If Biden follows through with the proposal, Americans could see a temporary reduction or suspension of taxes on gasoline, which help pay for things like highway construction and maintenance.
US states such as Connecticut, Georgia, and Maryland have already issued their own petrol tax holidays. The Penn Wharton Budget Model, an economic forecasting tool, said that consumers were the primary beneficiaries of those holidays, but cautioned that price reductions were “often not sustained during the entire holiday”. According to the Budget Model, 20 more states are considering similar steps. US Treasury Secretary Janet Yellen has also noted that she is open to a gas tax holiday.
The US Federal Reserve recently increased interest rates by three-quarters of a point, the steepest in nearly 30 years, and suggested that more increases may be instituted in the near future.
Biden has acknowledged that the economy could fall into a recession, but has also said that there is “nothing inevitable about a recession”.