Gas Tax Holiday Floated as Band-Aid for Skyrocketing Prices at the Pump

The average price of a gallon of gas in the U.S. hit $3.53 on Tuesday, up from $2.90 a month ago, according to AAA. Needless to say, Americans are not happy about it.

Gas prices have soared since the U.S. and Israel decided to start a regime change war in Iran on Feb. 28. And with President Donald Trump giving conflicting messages about how long the bombing will last, the world is rightly concerned this will become another forever war with countless lives lost and tertiary effects felt for generations.

For Americans at home, the most immediate impact is in gas prices. And there are new proposals by legislators at both the federal and state level to give U.S. drivers some relief with a gas tax holiday. The question is whether it will actually happen unless President Donald Trump gives his approval.

Democratic Senators Mark Kelly from Arizona and Richard Blumenthal from Connecticut introduced the Gas Prices Relief Act on Monday which would suspend the 18.4-cents-per-gallon federal gas tax until October 1, 2026. Rep. Chris Pappas, a Democrat from New Hampshire, plans to introduce similar legislation in the U.S. House.

“This legislation temporarily suspends the federal gas tax, lowering high gas prices squeezing consumers and bringing much needed financial relief to American families,” Sen. Blumenthal said in a statement posted online.

“Trump’s war of choice with Iran is driving up gas prices across the country—and Americans shouldn’t have to bear the additional economic burden of Trump’s reckless decision making,” Blumenthal continued.

Some state leaders around the country have proposed similar measures at the local level, with Connecticut Gov. Ned Lamont floating the idea that it would be good to suspend the 25-cents-per-gallon gas tax and 48.9-cent diesel tax, according to the CT Mirror.

In Pennsylvania, state senator Lisa Boscola has proposed a suspension of the Keystone State’s 57.6-cents-per-gallon tax for gasoline and 74-cents-per-gallon for diesel, according to the Echo-Pilot. That tax holiday would last for just 60 days if it became law.

Leaders in other states, however, have already shot down the idea of a gas tax holiday. California Gov. Gavin Newsom, a Democrat, released a statement Tuesday insisting that suspension of the gas tax wouldn’t actually help lower prices in California.

“Repealing gas taxes wouldn’t lower prices at the pump — it would hand oil companies a massive tax break with no guarantee that a single cent would be passed on to drivers,” Newsom’s office said in a statement posted online.

The statement claims that’s what happened in Florida, “where a gas tax holiday was reported to have been pocketed largely by fuel companies instead of consumers.” Newsom’s office argues that California’s gas taxes are “fixed costs that don’t fluctuate with the market and have nothing to do with the price spikes that Americans are experiencing this week.”

At the federal level, Republicans seem skeptical that a gas tax holiday is necessary. Sen. Shelley Moore Capito, a Republican from West Virginia and the chair of the Environment and Public Works Committee, suggested it would only happen if President Trump wanted it to happen.

“I think we’ll have to take the president’s lead on that. I think one week is too premature. If gas goes up, hopefully it’ll come back down just as fast,” Capito said March 6, according to Politico. “Right now, I think we’re just going to have to hold steady.”

About 20% of the world’s oil flows through the Strait of Hormuz, with the U.S. buying just a tiny fraction of that oil. The vast majority heads to Asia, but the oil market is global and cutting off supply anywhere jacks up prices everywhere. And the Strait of Hormuz is effectively shut down at the moment.

CNN reported Tuesday that Iran was already laying mines in the Strait to further impede shipping, which prompted President Trump to first insist that such a thing wasn’t happening, and then insist that he had bombed Iranian ships that may be used to lay mines.

The shipping industry has made “near-daily requests,” to the U.S. Navy for escorts through the Strait of Hormuz since the start of the war, according to a report from Reuters. But the military has refused. It’s simply not an efficient way to engage in world trade to escort every single ship through the Strait, even if President Trump has previously said the U.S. would do that if it became necessary.

Oil markets experienced quite a roller coaster Tuesday, largely because Energy Secretary Chris Wright tweeted that the Navy had escorted the first oil tanker through the Strait. Prices plunged to about $77 per barrel until Wright deleted the tweet and it became clear the Navy did no such thing. Prices rose again to $88, though it’s still below the $100 per barrel mark it hit Monday. Wright has not yet explained the tweet.