{"id":803367,"date":"2026-05-17T18:13:13","date_gmt":"2026-05-17T18:13:13","guid":{"rendered":"https:\/\/www.europesays.com\/us\/803367\/"},"modified":"2026-05-17T18:13:13","modified_gmt":"2026-05-17T18:13:13","slug":"suspending-federal-gas-tax-wouldnt-save-drivers-as-much-as-they-might-hope","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/803367\/","title":{"rendered":"Suspending federal gas tax wouldn\u2019t save drivers as much as they might hope"},"content":{"rendered":"

This article<\/a> originally appeared in The Conversation.<\/p>\n

With gasoline prices still high \u2013 averaging over US$4.50 a gallon<\/a> in mid-May 2026 \u2013 President Donald Trump said he wanted Congress to suspend the federal gas tax<\/a>, which is 18.4 cents a gallon for gasoline<\/a> and 24.3 cents a gallon for diesel. A bill has been introduced in the Senate<\/a>, and one is expected to follow in the House, according to Politico, but their fate is unclear.<\/p>\n

States also charge their own taxes, ranging from 70.9 cents a gallon for gas<\/a> in California to 8.95 cents in Alaska. Indiana, Georgia and Utah have suspended their gas taxes<\/a> for at least some of 2026, and other states are considering similar measures.<\/p>\n

As an energy economist<\/a>, I have seen how suspending those taxes does reduce prices, but not as much as politicians \u2013 or drivers \u2013 might hope. Research on past gas tax holidays has found that consumers get about 79% of the reduction<\/a> in gas taxes. That means oil companies and fuel retailers keep about one-fifth of the tax cut for themselves rather than passing that savings to the public.<\/p>\n

Suspending the federal gas tax, which would require Congress to pass a law<\/a>, wouldn\u2019t help consumers much anyway. Even if oil companies passed on the whole savings to consumers, national average gas and diesel prices would drop only about 4%. The percentage reduction in high-cost states such as California<\/a> would be even smaller.<\/p>\n

Gas taxes are just one part of what drives gas prices. Overall, the price of a retail gallon of gas is the sum of four things: the cost of crude oil, refining, distribution and marketing, and taxes.<\/p>\n

In nationwide figures from January 2026, crude oil accounted for about 51% of the pump price<\/a>, refining roughly 20%, distribution and marketing about 11% and taxes about 18%. That mix shifts with conditions: When crude oil prices spike, that can drive more than 60% of the price; when the price drops, taxes and logistics are larger shares of the cost.<\/p>\n<\/p>\n

Crude oil is the biggest ingredient<\/p>\n

Because the price of crude oil is the largest element, most of the price at the pump is derived from the global oil market.<\/p>\n

Usually, big swings in crude prices<\/a> come mainly from shifts in global demand and expectations \u2013 not from supply disruptions, according to widely cited research in 2009 by the economist Lutz Kilian.<\/p>\n

But what is happening in early 2026 with the war in Iran is one of the exceptions: a classic supply shock<\/a>. Severe disruptions to shipping through the Strait of Hormuz<\/a> and attacks on Middle East oil infrastructure have taken millions of barrels a day off the global market.<\/p>\n

Most drivers generally can\u2019t quickly reduce how much they drive or how much gas they use when prices rise, so gasoline demand doesn\u2019t change much in the short run<\/a>. That means a jump in crude costs tends to result in people paying more rather than driving less.<\/p>\n

Refining, regulations and the California puzzle<\/p>\n

Refining turns crude into gasoline at industrial scale. The U.S. doesn\u2019t have a single gasoline market, though. Roughly a quarter of U.S. gasoline<\/a> is a cleaner-burning blend of petroleum-derived chemicals called \u201creformulated gasoline<\/a>,\u201d which is required in urban areas across 17 states and the District of Columbia to reduce smog.<\/p>\n

California uses an even stricter formulation<\/a> that few out-of-state refineries make. California is also geographically isolated: No pipelines bring gasoline in from other U.S. refining regions.<\/p>\n

California\u2019s gasoline prices have long run above the national average, explained in part by higher state taxes<\/a> and stricter environmental rules. But since a refinery fire in Torrance, California, in 2015<\/a> reduced production capacity, the state\u2019s prices have been about 20 to 30 cents a gallon<\/a> higher than what those factors would indicate.<\/p>\n

Energy economist and University of California, Berkeley, professor Severin Borenstein has called this the \u201cmystery gasoline surcharge<\/a>\u201d and attributes it to the fact that there isn\u2019t as much competition between refineries or gas stations in California as in other states. California\u2019s own Division of Petroleum Market Oversight says the surcharge cost the state\u2019s drivers about $59 billion from 2015 to 2024<\/a>. It\u2019s not exactly clear who is getting that money, but it could be gas stations themselves or refineries<\/a>, through complex contracts with gas stations.<\/p>\n

Getting the gas into your car<\/p>\n

The distribution and marketing category covers the costs of everything involved in getting the gasoline from the refinery gate to your tank.<\/p>\n

Gasoline moves by pipeline, ship, rail and truck to wholesale terminals, and then by local delivery truck to service stations.<\/p>\n

At the retailer\u2019s end, the key factors are station rent and labor, the cost to buy gasoline in bulk to be able to sell it, credit card fees<\/a> of as much as 6 to 10 cents a gallon at current prices, and franchise fees paid to the national brand, such as Sunoco or ExxonMobil, for permission to put their branding on the gas station.<\/p>\n

Most gas station operators net only a few cents per gallon<\/a> on fuel itself \u2013 which is why many gas stations are really convenience stores with pumps out front. Borenstein and some of his collaborators have also documented that retail gas prices rise quickly<\/a> when wholesale costs climb but fall slowly when wholesale costs drop.<\/p>\n

The question of gas tax holidays<\/p>\n

Gas tax holidays reduce funding for what the taxes are designed to pay for<\/a>, typically roads and bridges. That pushes road and bridge upkeep costs onto future drivers and general taxpayers.<\/p>\n

There is an additional problem, too: Taxes on gasoline are supposed to charge drivers for some of the costs their driving imposes on everyone else<\/a> \u2013 carbon emissions, local air pollution, congestion and crashes. But Borenstein has found that U.S. fuel tax levels are already far below the true cost to society<\/a>. Removing the tax on drivers effectively raises the costs for everyone else.<\/p>\n

The Jones Act: A small number that adds up<\/p>\n

The 1920 Jones Act<\/a> is a federal law that requires cargo moving between U.S. ports to travel on vessels built and registered in the U.S., owned by U.S. citizens, and crewed primarily by U.S. citizens and permanent residents. Of the world\u2019s 7,500 oil tankers, only 54 meet this requirement<\/a>. Only 43 of these<\/a> can transport refined fuels such as gasoline.<\/p>\n

So, despite significant refining capacity on the Gulf Coast, some U.S. gasoline is exported overseas even as the Northeast imports fuel, in part reflecting the relatively high cost of moving fuel<\/a> between U.S. ports.<\/p>\n

Economists Ryan Kellogg and Rich Sweeney estimate that the law raises East Coast gasoline prices by about a penny and a half per gallon<\/a> on average, costing drivers roughly $770 million a year. In light of the war\u2019s effect on gas prices, the Trump administration has temporarily suspended the Jones Act requirements<\/a> \u2013 an action more commonly taken when hurricanes knock out Gulf Coast refineries and pipeline networks<\/a>.<\/p>\n

What moves the number<\/p>\n

The result of all these factors is that the price that drivers see at the pump mostly reflects the global price of crude, plus a stack of domestic costs, only some of which are inefficient.<\/p>\n

Tax holidays give a partial, short-lived rebate. Jones Act waivers trim pennies, though permanent repeal may cause more fundamental changes, such as reduced rail and truck transport of all goods<\/a>, which could lower costs, emissions and infrastructure damage associated with cargo transportation. Harmonizing fuel blends across states and seasons may lower prices somewhat, but likely at the expense of increased emissions.<\/p>\n

Ultimately, the best protection against oil price shocks is a more efficient gas-burning vehicle, or one that doesn\u2019t burn gasoline<\/a> at all. In the meantime, the best I can offer as an economist is clarity about what that $4.50 actually buys.<\/p>\n

This article includes material previously published<\/a> on May 1, 2026.<\/p>\n

Robert I. Harris<\/a>, Assistant Professor of Economics at Georgia Institute of Technology<\/a> joined the faculty at the School of Economics in 2023. His research and teaching interests are in energy and environmental economics, industrial organization, and public economics. Much of his existing work has implications for climate policy and the energy transition.<\/p>\n

Bobby holds a PhD in environmental economics from Duke University (2022) and undergraduate degrees in mathematics and economics from the University of North Carolina at Chapel Hill (2016). Prior to joining Georgia Tech, he was a Postdoctoral Scholar with the Initiative on Equity in Energy and Environmental Economics at the Energy Institute at Haas at the University of California, Berkeley.<\/p>\n

The Conversation<\/a> is a nonprofit, independent news organization dedicated to unlocking the knowledge of researchers, scientists and scholars for the public good.<\/p>\n","protected":false},"excerpt":{"rendered":"This article originally appeared in The Conversation. With gasoline prices still high \u2013 averaging over US$4.50 a gallon…\n","protected":false},"author":3,"featured_media":803368,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[5134],"tags":[5229,1582,276,9967,71624,6087,270,3549,7264,618,67,586,132,5230,68,2969],"class_list":["post-803367","post","type-post","status-publish","format-standard","has-post-thumbnail","category-san-diego","tag-america","tag-ca","tag-california","tag-gas-prices","tag-gasoline","tag-iran-war","tag-oil","tag-san-diego","tag-sandiego","tag-taxes","tag-united-states","tag-united-states-of-america","tag-unitedstates","tag-unitedstatesofamerica","tag-us","tag-usa"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/116591277224388392","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/803367","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=803367"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/803367\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/803368"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=803367"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=803367"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=803367"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}