As economy reels from gas price hikes, Biden proposes gas tax holiday

06/23/2022 / By Mary Villareal

Farmers are now struggling to make ends meet while producing food as diesel prices continue to climb.

Pennsylvania farmer Kyle Kotzmoyer told state lawmakers he could not afford the diesel fuel to run his tractor, which is hooked up to his corn plant. He warned the Pennsylvania Legislature that food may no longer be readily available if higher fuel prices continue.

Given that farmers use diesel for their machinery, they may not be able to transport food. If in case they do, it would become much more labor-intensive – causing further food price increases.

Kotzmoyer, who also serves as legislative affairs specialist for the Pennsylvania Farm Bureau, appealed to state lawmakers for aid. He admitted that farmers like him are at a precarious situation, close to becoming a sinking ship and teetering on the edge.

Iowa farmer Craig Moss also shared Kotzmoyer’s sentiments, saying that they managed to have some farm diesel delivered between $4.85 and $4.89 a gallon. Two years earlier, diesel had only been $1 a gallon. (Related: Diesel prices rising rapidly, farmers suffer as off-road diesel for farm use hovers above the $5 mark.)

Aside from farmers, the trucking industry is likewise affected by the rising diesel prices. From an average of $3.21 per gallon a year ago, it has now risen to an average of $5.77.

Even petroleum industry analysts have noticed the constant rise of fuel prices. Patrick DeHaan, petroleum analysis head at GasBuddy, remarked that it almost seems like the live petroleum price indicator in their charts ticks up every five minutes.

A sliver of hope appeared as the average national gas price fell to below $5 per gallon for regular unleaded. The price drop followed a similar reduction in the world market as gasoline fuel fell from $122 to $110 per barrel.

Biden’s gas tax holiday a gimmicky, short-term fix

In line with the current situation, President Joe Biden proposed a federal gas tax holiday for a three-month period. Under the holiday, federal taxes on gas producers amounting to 18.40 cents for every gallon of gasoline and 24.40 cents for every gallon on diesel fuel would be put on hold. However, this would require Congressional approval and 60 votes – with at least 10 from Republicans – for it to take effect.

Aside from this, Biden is also encouraging states to suspend their gas taxes. However, the short-term solutions remain unlikely to provide relief to Americans for more than a day or two. (Related: Biden threatens oil firms: Do something about rising gas prices or face consequences.)

Some experts remarked that if the federal gas tax holiday is approved, it could only provide mild relief. According to the University of Pennsylvania‘s Penn Wharton Budget Model, a federal gas tax holiday for 10 months would lower average per-capita gas spending between $16 and $47.

John Leer, chief economist at research firm Morning Consult, said of the proposal: “While a gas tax holiday may provide temporary relief from record-setting prices for some consumers, it may also drive demand even higher, thereby stoking inflation.”

Ultimately, JP Morgan Global Commodities Strategy Head Natasha Kaneva pointed out that the Biden administration will be “left with few good options” unless it can find a refinery that can help restart or ramp up oil production in the next few months.

“With demand stimulated and supply constrained, fuel prices will continue rising until demand is destroyed to a level where it can meet supply,” she said.

To this end, Biden announced plans to visit Saudi Arabia in July with a view to persuading the Saudis to pump more oil – increasing supply and lowering fuel prices.

Follow FuelSupply.news for more updates about fuel price hikes.

Watch President Joe Biden exhorting Congress to approve the gas tax holiday below.

This video is from the Covid Times channel on Brighteon.com.