Economic Reality Check on Gas Tax Holiday

What Obama called a political gimmick(link) is exactly what his former Vice President is now desperate enough to seriously consider. Even though his former boss correctly categorized it as gimmicky, Biden is considering temporarily stopping the 18 cent per gallon federal gasoline tax (24 cents/gal. on diesel) even though it is what funds the construction of our roads and bridges. He is so desperate to prove to voters that he has done something to help with gas prices that he may do something crazy.

An Oilprice article from Rystad Energy(link) makes the consequences very plain:

“Diesel is the lifeblood of the global economy, essential to vital sectors such as agriculture, construction, and transportation – its price impacts almost all supply chains and goods. Governments face tough decisions. They can assist consumers by dropping taxes on diesel, but this will likely only increase demand, which may support the overall economy but will worsen the existing tight supply situation. If supply does not improve, governments will be forced to enact emergency plans to limit sales to consumers in order to ensure essential sectors are kept going,” says Per Magnus Nysveen, Head of Analysis at Rystad Energy.

So Biden can temporarily call off federal fuel taxes, cut off critical funds for roads, and increase demand for fuel, exacerbating the gasoline and diesel shortage which is causing high prices in the first place.

It seems like Obama was right. It is a political gimmick!

Maybe Biden should consider expediting pipelines, reinstating leases his administration has pulled, and giving energy companies and refiners the regulatory environment they need to invest billions of dollars into enterprises that require years before producing a return on investment.

However, if the timeframe we are working under is the November elections, political gimmicks are probably the only things available to Biden at this point.