Suspending federal gas tax wouldn't save drivers as much as they might hope - here's what goes into the price of ....... [View all]

Suspending federal gas tax wouldn’t save drivers as much as they might hope – here’s what goes into the price of a gallon of gas
Published: May 12, 2026 10:54am EDT

Robert I. Harris
Assistant Professor of Economics, Georgia Institute of Technology


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

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As an energy economist, I have seen how suspending those taxes does reduce prices, but not as much as politicians – or drivers – might hope. Research on past gas tax holidays has found that consumers get about 79% of the reduction 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.

Suspending the federal gas tax, which would require Congress to pass a law, wouldn’t 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 would be even smaller.

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. ...................(more)

https://theconversation.com/suspending-federal-gas-tax-wouldnt-save-drivers-as-much-as-they-might-hope-heres-what-goes-into-the-price-of-a-gallon-of-gas-282702