President Joe Biden has called for a three-month suspension of the federal gasoline tax in response to the country’s soaring energy prices.
The average cost of a gallon of gas, or petrol, is hovering near $5, up from roughly $3 a year ago.
With national elections for Congress coming in November, President Biden is under pressure to respond.
Analysts say that removing the levy would have limited impact on household petrol and diesel costs.
Political support for the gas tax holiday, which would require an act of Congress, is also uncertain.
President Biden said policymakers should do what is in their power to try to ease the strain on families, calling on companies to pass on “every penny” in savings to the public.
“I fully understand that a gas tax holiday alone is not going to fix the problem,” he said.
“But it will provide families some immediate relief, just a little bit of breathing room as we continue working to bring down prices for the long haul”.
Photo AP
Currently, the US imposes a tax of roughly 18 cents per gallon on gasoline and 24 cents on diesel, using the money collected to help pay for highway infrastructure.
Eliminating the levy through September, as President Biden has proposed, would cost the government an estimated $10 billion.
The move is the latest effort from countries around the world to address the soaring energy costs.
Oil prices have surged since last year, as demand outstrips supplies constrained by cuts that many firms made after the pandemic hit in 2020 and prompted demand to crater.
As the war in Ukraine pushes Western countries to shun oil from Russia – a major energy producer – that has also contributed to the crunch.
The American Fuel and Petrochemical Manufacturers industry group said a gas tax holiday would provide “near-term relief but it won’t solve the root of the issue – the imbalance in supply and demand for petroleum products”.
President Biden has already taken steps like releasing unprecedented amounts of oil from national stockpiles and lifting taxes on imports of solar panels.
As well as suspending the national gasoline tax, President Biden is urging similar steps by state governments, which typically impose their own taxes, often higher than the federal government’s.
Some states, including New York, have already suspended those charges.
The president, who has intensified his criticism of oil and gas companies in recent weeks, also called on the industry to increase output and refining capacity, while directing some of his pleas to gas station owners across the country.
“These are not normal times,” he said, pointing to the war in Ukraine and noting that oil prices have retreated from earlier highs.
“Bring down the cost at the pump to reflect the price you are paying for the product. Do it now, do it today”.
The price of gasoline in the US is already lower than in many other countries.
Oil prices fell again on January 25, eroding last week’s gains, as OPEC called for co-operation from oil-producing nations outside the cartel.
Brent crude fell 2.6% to $31.34 a barrel following a 10% rise on January 22, while US oil shed 95 cents to $31.24.
The slide came as the head of OPEC called for all oil-producing nations to work together.
Abdalla Salem el-Badri said both OPEC and non-OPEC oil producers needed to tackle oversupply to help prices rise.
“It is vital the market addresses the issue of the stock overhang. As you can see from previous cycles, once this overhang starts falling then prices start to rise,” he told a conference in London.
Photo AP
Despite the ongoing refusal of Saudi Arabia, the dominant OPEC member, to cut production, Abdalla Salem el-Badrinevertheless blamed countries outside the cartel for the huge global oil glut.
“Yes, OPEC provided some of the additional supply last year, but the majority of this has come from non-OPEC countries,” he said.
The organization accounts for almost 42% of the world’s oil production.
The OPEC secretary-general said all major producers should agree on methods to reduce stockpiles and thus help prices recover.
“The current environment is putting this future at risk. At current price levels, it is clear that not all of the necessary future investment is viable,” Abdullah al-Badri said.
Oil prices briefly fell to less than $28 a barrel earlier this month.
HSBC has lowered its forecast for the average price of Brent crude in 2016 from $60 to $45 a barrel, while UniCredit lowered it from $52.50 to $37 a barrel.
The prospect of OPEC members cutting production remains unlikely. Indonesia’s OPEC representative said that only one member of the cartel supported calling an emergency meeting to discuss ways of boosting oil prices.
The chairman of Saudi Aramco, the state-owned oil giant, said on January 25 that prices would ultimately rise to a moderate level as global demand increased.
The Iraqi government said on the same day that oil output reached a record high in December, producing as much as 4.13 million barrels a day.
Iran, which has the world’s fourth-biggest oil reserves, is also preparing to resume exports now that sanctions have been lifted.
A fall in the number of oil rigs in the US, one of OPEC’s biggest production rivals, could reduce output, with Goldman Sachs predicting a decline of 95,000 barrels per day this year.
Oil prices rallied on February 2 as investors speculated that the falling cost of crude may have ended.
Brent crude was up 1.3% at $53.65 a barrel, having reached $55, while US oil rose 1.7% to $48.52.
It followed the release of data showing that US demand for leasing oil rigs was slowing, suggesting that producers might be preparing to cut output.
Meanwhile, ExxonMobil reported a 21% fall in quarterly earnings on lower oil and gas production.
On January 30, data showed that more than 90 US oil rigs were idled, the largest number to be wound down in a single day since the mid-1980s.
Today’s price rise extended the gains made last week, and boosted oil and gas share prices. Tullow Oil rose almost 7%, while BG Group climbed 5%.
Since last summer, the prices of Brent and UK West Texas Intermediate Crude have fallen from above $100 a barrel.
Meanwhile, Exxon, the world’s largest publicly traded oil company, saw profit in the fourth quarter fall to $6.57 billion, from $8.35 billion for the same three months the year before.
Oil and natural gas production fell 3.8%, Exxon said.
The US oil price has dropped below $50 a barrel for the first time since April 2009.
The price of Brent crude also fell on January 5, dipping more than 6% to trade at below $53 a barrel.
The price of both Brent crude and US oil, known as West Texas Intermediate crude, have now lost more than half of their value since mid-2014.
Investors are worried that combination of a global supply glut and weak demand could cause prices to tumble further.
US oil production has soared recently, as fracking – or the process of extracting oil from shale rock by injecting fluids into the ground – has revolutionized oil production in the country, transforming states such as North Dakota and Pennsylvania in the process.
However, the increase in production has come just as economies across the world – from Europe to China – have slowed their once voracious demand for oil.
This, combined with OPEC’s decision to continue extracting oil at its current pace, has left many investors worried.
That has in turn led shares of many of the world’s leading energy firms, from BP to Exxon Mobil, to decline sharply over the past few months.
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