One of President Joe Biden's biggest current dilemmas is deciding what to do about problems he has no actual ability to solve. Inflation is soaring across the world—but it's because of continued pandemic instabilities and bolloxed supply chains, a thoroughly abnormal situation at odds with the theories of "inflation" that reside in government heads. (That hasn't stopped the Federal Reserve and certain omnipresent economists from responding in the only way they know how: declaring that the problem is that Too Many Americans Have Jobs these days and the economy needs a good, solid baseball bat to the knee to keep those workers in their place.)
The world is currently suffering from skyrocketing fuel prices as well, which is not a thing that any White House can really do a damn thing about. But political leaders need to look like they're doing a thing, which is why the Biden administration is now asking Congress for a three-month suspension of the federal gas tax.
Yeah, here we go again.
The federal gas tax on gasoline is currently 18.4 cents per gallon (for diesel, it’s 24.4 cents.) The current price of gasoline at the pump is in the ballpark of $5 per gallon, which means that if your local station price is listed as, say, an above-average $5.50 per gallon and the federal gas tax goes away, the price will drop to $5.32 per gallon if Congress agrees to this pause.
The first question, then, is whether any of the consumers paying the highest gas prices will (1) even notice the change, much less (2) attribute the slightly lower prices to the magnanimity of the federal government, rather than a product of the same price fluctuations that keeps consumers guessing every time they pull up at the pump.
The second question is whether gas retailers will truly pass on the full 18 cents of savings to customers or will simply keep prices as high as their local customers will bear, aka What Capitalism Is, and pocket the difference as extra profit. Here's a tip: That is absolutely what will happen. Gas stations nationwide tune their prices daily in accordance with not just fuel prices, but local competition. Gas prices at the pump always rise quickly in response to supply pressures, but fall much more slowly because if consumers have begrudgingly started paying the higher price, it's only local competition between stations that's going to cause sellers to drop those prices again. The consumer need for gas is relatively inelastic; in the very short and very long terms, price changes can alter consumer behavior but in the midterm, people need to go where they need to go. If you charge them an extra buck per gallon to get there, most of the country is well and truly stuck paying it because there aren't any mass transit alternatives. It's carpooling, staying home, or getting squeezed.
Biden's proposal is one he likely has to make from a purely political standpoint, and one that is going to cause quite a ruckus in Congress. Democrats in tough reelection races are eager for a gas tax holiday because they can brag they did something and because the overall consumer mood is turning quite sour, usually the prelude to a full routing of the in-power party in upcoming midterms. Policy-minded Democrats are likely to oppose the move because it's not likely to actually result in lower gas prices, even as it drains federal infrastructure dollars. Republicans have to decide whether to do something that they themselves claim might help the economy in the run-up to the midterms, which they absolutely have no intention of doing, but others might be swayed by the "screwing the federal government out of infrastructure dollars" appeal, ready to demand that the gas tax be repealed entirely once the three-month tax break expires.
From the standpoint of political strategy, this is all quite a mess and will remain so. From a purely policy standpoint it's objectively a bad idea—there is no way a gas tax suspension will significantly lower gas prices because it's a small, fixed amount that's smaller than the weekly fluctuations in prices consumers are currently seeing, even if stations passed on every penny (which they won't). And prices are almost certainly going to spike again as the summer travel season arrives, because that's what happens every year; this, too, will dwarf whatever actual impact a gas tax holiday has on station prices.
Before anyone starts rending their garments over what a bad idea this might be, however, the political realities here are themselves consequential. It may be bad policy to pass a token gas tax holiday that's more likely to go right into the pockets of big oil than it is to provide consumer relief, but right now conservative (fascist) outlets and politicians are quite boldly asserting to the Republican base that Biden is an economic antichrist who has raised gas prices worldwide solely through the power of being evil, and sure maybe your state's Republican politicians tried to end our nation's democracy, caused violence in the U.S. Capitol, and continue to aid and abet a national cover-up while passing new laws intended to facilitate future coup attempts, but if it's a choice between keeping democracy and high gas prices wouldn't anyone choose cheap gas over democracy?
Patriotism is being able to roll coal on your way to the funerals of the latest mass murder victims. Conservative media is filled with interviews in which normal, everyday Americans insist that gas prices are far more important than whether or not Donald Trump, who they would still vote for, did a treason.
So yeah, perhaps the Biden White House isn't on policy thin ice after all if they're thinking that they need to do whatever token efforts they can to make the big numbers on street corners go down a little. Half the country is feeling pretty sure that $5 a gallon for gas is a worse fate than fascism, and they've got Tucker Carlson and clan telling them so.
The kicker to all of this, though, is that we know why gas prices are high. It's in all the papers, really. On top of constant regional pandemic crises, the Russian invasion of Ukraine led to worldwide chaos in fuel markets as sanctions closed in on Russia, requiring or at least encouraging buyers to find non-Russian sellers. Chaotic markets mean higher prices.
But, the oil companies themselves are skating through this with record profits. That's not the sign of a struggling oil market, but a sign that oil companies are using current markets to lock in cash grabs while they can.
Does this amount to price gouging during a crisis? You could make the case, but mostly, nobody's even bothering to ask. It's a worldwide given that oil markets have the rest of us quite literally over a barrel. Regional consortiums conspire to ensure prices remain high and oil-rich nations can milk their known reserves for the best possible prices. U.S. oil companies collect record profits and still insist that if they don't get every last possible tax break the industry can invent, society as we know it will collapse.
A better political move than a gas tax holiday might be a full-throated assault on the oil industry for its profound record of suckery. Voters are already onboard with that message; polling shows that voters overwhelmingly believe it's "corporate greed" that's causing soaring prices, not political figures, and over four in 10 voters believe oil companies are "price gouging." Biden could also do more to single out oil companies for their role in sabotaging plans to move America to renewable fuel sources, pointing to the current price spikes as reason number one for making the switch and getting out from under their thumb.
But that, too, would quickly become a "culture war." It is likely that state governments in places like Texas would respond by declaring that oil extraction is now a religion, passing new laws that make it illegal to insult oil industry executives and providing cash bounties to hunt down anyone who does. The oil companies own our politicians like few other industries can claim to.
It is all a rich tapestry of suck, but in a nation where a good chunk of the population can be convinced that a non-fascist president is intentionally raising gas prices in order to harm the good, kind people of Racistville, or however that's supposed to go, we face yet another election in which the fate of the nation and the planet is likely second in many voters' minds to new concerns that the SUV they just bought is now costing them more money to drive than they thought it would.
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