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Supply and demand are making gas prices high. Would cutting the federal gas tax help?

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Greg Robleto
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Flickr Creative Commons

Gasoline prices were already experiencing high inflation but when Russia launched an invasion into Ukraine last week, they surged again. On Monday, Senator Richard Blumenthal said he and nine of his Congressional colleagues are urging President Biden to use all the tools he has to lower gas prices in America. Speaking in Hartford, Blumenthal said that includes encouraging the president to release supply from the Strategic Petroleum Reserve and pressuring oil companies to produce more fuel.

But Blumenthal said there’s something Congress can do too. “I am supporting legislation to suspend the gas tax, the 18.4 cents [per gallon],” he said.

Temporarily suspending the federal gas tax is a controversial move, according to Congressman Jim Himes. Speaking Monday on Connecticut Public Radio's Where We Live, Himes said, “as this gathers steam in the Congress, a lot of us will give it a hard look but it’s not a no-brainer.”

The federal gas tax goes to funding transportation infrastructure and Himes said he doesn’t want to lose that while also encouraging more fossil fuel consumption.

Suspending the tax doesn’t solve the problem of supply. “[It’s] more of a band aid than an actual solution to what’s happening,” said Chris Herb, the president of the Connecticut Energy Marketers Association.

Herb would like to see U.S. energy policy encourage more domestic production. “Let's go back to using the tools that are available,” he said, ”that don’t require us to ask Russia to export more oil to the United States.” Because being able to tell domestic producers to up their production, he said, is a lot easier than needing to ask for more from OPEC, the group of oil producing countries that largely control global supply, especially at a time of conflict. He added that the conflict in Ukraine, so far, hasn’t affected supply.

It’s really the pandemic, not the conflict in Eastern Europe, that made supply an issue, according to Steven Lanza, an economist at the University of Connecticut. “Suppliers over the last couple of years pared back on production because it didn’t make sense for them to pump out oil…because nobody was going anywhere,” Lanza said.

Production takes a while to get back up to speed, Lanza added, and that’s a reason gas prices are high right now.

Lanza said the federal gas tax represents 5% of the average cost of a gallon of gas right now, and consumers likely wouldn’t notice much of a difference if it were removed.

On the day Russian forces invaded Ukraine, Connecticut wholesale prices jumped 20 cents per gallon, according to Chris Herb, but then the local market realized that reserves in New Haven and Bridgeport were full. As of Monday, local gas prices were up only 4 cents since the invasion.

Ali Oshinskie is a corps member with Report for America, a national service program that places journalists into local newsrooms. She loves hearing what you thought of her stories or story ideas you have so please email her at aoshinskie@ctpublic.org.

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