During my first term in Congress (2005-2006), I vividly recall a surge in gasoline prices. Democrats blasted then President George W. Bush and Vice President Dick Cheney, demonizing them for their prior work in fossil fuels and the energy sector.
The Democrats contended these two oilmen led an administration too friendly to the oil and gas industry and initiated a war of choice in Iraq to serve those interests. Predictably, there were calls for suspending the 18.4-cent- per gallon federal gasoline tax.
It was a terrible idea then just as it is now. The House majority leader at the time, Tom DeLay, asked me back then how I felt about the proposed suspension of the federal gasoline tax, to which I responded: “It’s a dumb gimmick.” He agreed and he wisely never brought gas tax suspension legislation to the House floor.
And now, just this week, President Joe Biden proposed to suspend the federal gas tax for three months, better known as a gas tax holiday. This desperate political act misses the mark on many levels. Congressional Democratic leaders should give the Biden proposal the DeLay treatment: Bury it.
Demagoguing big oil, speculators, refiners and windfall profits will not change the fundamentals of supply and demand. Yes, Russian President Vladimir Putin’s grotesque, unprovoked war on Ukraine certainly is contributing to higher prices at the pump, but it is not the cause of our current predicament.
Demand for oil and gas has increased as we continue to emerge from the pandemic while supplies have not kept pace. It might be politically convenient to blame a few oil executives in Houston for higher prices, but that will do nothing to relieve pain at the pump experienced by Americans. Speculation on future supply and demand is a normal function of the market.
A new oil refinery with significant downstream unit capacity, according to the Energy Information Administration, has not been built in this country since the late 1970’s. Jimmy Carter imposed a windfall profits tax in 1980, which further aggravated supply problems back then by discouraging investment in oil production. And don’t forget President Richard Nixon’s misguided wage and price controls that led to the rationing of gasoline.
America must transition to cleaner and greener sources of energy that emit less carbon. Diversifying America’s energy portfolio is a national imperative. What Washington must not do is assault the American oil and gas industry as part of that transition during a time of war, sanctions, inflation and broader economic uncertainty.
This crisis requires a pragmatic response from policymakers. More Republicans must seriously engage on climate change and more Democrats must stop their relentless attacks on the American oil and gas industry.
Oil is a globally traded commodity. To the extent American oil displaces oil from Russia, Iran, and Venezuela, all the better. Where the supply of oil originates does matter.
When the Biden administration deploys the power of the federal government to kneecap domestic production by, among other things, limiting new leases for drilling, impeding new pipelines in North America, and discouraging financing of fossil fuel projects, that hurts American consumers and manufacturing.
What’s more, relying on authoritarian regimes for oil will lead to higher carbon emissions. American producers employ cleaner production methods while autocratic producers are not as effective or interested in limiting leaks of methane and capturing carbon dioxide.
Understandably, Biden plans to meet the Saudis to open the oil spigot. Better that than the loud whispers of allowing more Iranian and Venezuelan oil to be exported. Like Russia, Iran and Venezuela are criminal, corrupt regimes dedicated to destroying the American-led international order and undermining American power and influence. Better to produce the oil ourselves — and ask both democratic and non-democratic oil suppliers that support the international order to increase production — to put downward pressure on price.
All of this leads back to the ill-considered gas tax holiday.
On the heels of enactment of a landmark infrastructure law, for which Biden and Congress deserve credit, why would the President deplete for three months the revenue generated by the federal gasoline tax dedicated to road, bridge and other infrastructure projects throughout the country?
States will be negatively impacted, too, as non-federal (mostly state) funding is used to match the federal dollars on major infrastructure projects. Yes, the administration claims it will backfill lost gasoline tax revenue for highway projects with other money — money that will be borrowed, adding to an already bloated deficit.
The amount of gasoline tax revenue generated by vehicle mile traveled has been declining for many years, thanks to greater auto fuel efficiency. Maybe the administration and Congress should consider a vehicle miles traveled (VMT) fee for drivers of electric vehicles who pay no gasoline tax but use the roads like the rest of us driving cars with internal combustion engines do? (While they’re at it, why not eliminate the inflationary Trump tariffs, as even one Trump former adviser is calling for.)
Further, there is no guarantee any savings from the gas tax holiday would be passed on to the motoring public. Prices at the pump might rise anyway depending on unforeseen factors further limiting supply which are outside the control of Washington.
The federal gas tax holiday is a terrible idea whose time, once again, has come and gone. Congress must scrap this dumb gimmick and focus on real solutions that seriously address our current predicament.
The post Biden wants a gas tax holiday. Here are a few better ideas appeared first on CNN.