President Biden on Wednesday announced his plan for sky-high gasoline prices that relied on just about everybody else – state governments, Congress, oil companies – besides the White House to do something about it, but the “call to action” was panned by just about everybody involved.
Mr. Biden called for Congress to pass a three-month suspension of the 18.4-cent-per-gallon federal tax on gasoline and the 24-cent-per-gallon federal tax on diesel.
He urged states to pause their gas taxes, many of which are higher than the federal rate. The president also asked the oil industry to lower its profits while increasing supply and refining capacity.
“I’m doing my part,” Mr. Biden said. “I want the Congress, states and the industry to do their part as well.”
Taken together, the White House believes the actions could reduce fuel prices by up to $1 per gallon.
The proposal met swift blowback from members of Mr. Biden’s Democratic Party, including party leaders in Congress who revolted against his call to suspend the gas tax.
“I’m going to look at it — certainly — sympathetically, in the sense that the president is trying to do what I think is a good objective,” said House Majority Leader Steny Hoyer, Maryland Democrat. “What I’m not sure of is, in fact, that will have the intended effect … and whether it will save consumers money.”
Rep. Peter DeFazio, chairman of the Transportation and Infrastructure Committee, said it was a “well-intentioned but ill-conceived policy.”
“I’m going to be working against it,” he said. “I do not support suspending the gas taxes. You know what happens in this town? You suspend the tax, it’s gone forever because then what? This ends in September, [then Republicans say] ‘Democrats are raising your taxes!’”
House Speaker Nancy Pelosi, California Democrat, previously characterized a gas-tax holiday as a public relations stunt.
On Wednesday, she said she will “see where the consensus lies on a path forward for the president’s proposal in the House and the Senate.”
The Democrats’ pushback again the president was striking. Not only is Mr. Biden the leader of the Democratic Party but the high price of gasoline is a top concern of voters in a tough midterm election year for the party.
Mr. Biden’s scrambling for an answer to Americans’ pocketbook problems and the willingness of his Capitol Hill allies to reject his efforts underscored the Democrats’ mounting frustration with the White House.
The states, including Democrat-led states, are not likely to heed Mr.
Biden’s call, either.
Although many states have considered it, just four — Maryland, Georgia, Connecticut, and New York — have implemented a state gas tax holiday. Florida approved a one-month suspension of its gas tax that will start in October.
Tax experts said Mr. Biden has little choice but to rely on Congress to pause the federal gas tax. Executive action won’t work, they said.
“It’s a classic power of the purse situation,” said Alex Muresianu, an analyst at the Tax Foundation, an independent tax policy think tank in Washington. “It’s something that should fall under the purview of Congress.”
Even if Mr. Biden could waive the tax unilaterally, it’s not a good move, according to critics. They say it would be a drop in the bucket when the national average is just shy of $5 per gallon.
The average American uses about 47 gallons of gasoline per month, according to the U.S. Department of Transportation’s Federal Highway Administration. At $5 per gallon, the average American would save about $8.64 per month from a federal gas-tax holiday.
“I fully understand that a gas tax holiday alone is not going to fix the problem,” Mr. Biden said. “But it will provide family some immediate relief, just a little bit of breathing room as we continue working to bring down prices for the long haul.”
Opponents are also skeptical that gas stations would pass the marginal savings down to consumers. They also worry it would siphon billions of dollars from the Highway Trust Fund which relies on the gas tax to pay for road projects.
“It’s a huge gimmick that’s not going to help very much in the near term and it’s going to make things worse over the medium term,” said Marc Goldwein, the senior policy director for the Committee for a Responsible Federal Budget.
What’s more, economists warn that rising gas prices are primarily the result of high demand and low.
“If prices are going up, subsidizing demand doesn’t make a whole lot of sense. That would make the problems worse,” said Muresianu of the Tax Foundation.
The Biden plan does call for some supply-side solutions.
“I know my Republican friends claim we’re not producing enough oil. And I’m limiting oil production,” Mr. Biden said. “Quite frankly, that’s nonsense.”
He touted his move to release 1 million barrels of oil per day from the strategic petroleum reserve, part of the administration’s coordinated effort for “the largest release of global oil reserves in history.”
Mr. Biden blamed corporate greed for sky-high prices.
“This is a time of war, global peril, Ukraine,” he said. “These are not normal times. Bring down the price you are charging at the pump to reflect the cost you are paying for the product.”
Industry executives and economic experts say U.S. refineries are already close to maxed out.
“Refineries are operating at about 95% of capacity, so there’s really not much more they can do,” said Jonathan Lesser, president of Continental Economics and adjunct fellow at the Manhattan Institute.
“Secondly, you’ve got Secretary of Energy Granholm, saying, ‘Oh, we’re not going to need any of this in five to 10 years,’” he said. “Why would anyone invest billions of dollars to expand refinery capacity, and face all the environmental hurdles.”
He said there is no quick fix to the problem.
Energy Secretary Jennifer Granholm and other administration officials are set to meet Thursday at the White House with major oil companies, including Chevron and ExxonMobil.
Mr. Biden told major oil companies in a letter last week that “refinery profit margins well above normal being passed directly onto American families are not acceptable.”
He also warned that he could use the Defense Production Act to force the industry’s hand.
The comments have sparked a tense row between the oil executives and the White House.
Chevron on Tuesday told Mr. Biden that if he is truly interested in blunting high gas prices, his administration should stop demonizing oil companies and instead engage in “honest dialogue” about the importance of domestic oil production.
Mike Wirth, chair and CEO of the energy giant, said “clarity and consistency” from the White House on energy policy would do more to rein in gasoline prices than name-calling and threats.
Frank Macchiarola of the American Petroleum Institute said policymakers have been incorrectly focused on “short-term fixes in lieu of long-term solutions.”
“If Washington is serious about delivering relief to consumers, then they should be focused on policies that encourage increased U.S. production and address the global mismatch between energy demand and available supply,” he said.
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