This post was originally published on this siteAs the Commerce Department releases its monthly report, economists estimate shoppers increased spending modestly with fuel taking up a smaller share of costs.
Inflation comes off 40-year high but stays elevated at 8.5% as gas prices fall but food, rent jump, CPI report shows
This post was originally published on this siteInflation backed off a 40-year high last month as gas prices fell but food and rent costs rose again, CPI report shows
This post was originally published on this site The OPEC+ group of major oil exporters meets Wednesday to discuss its output strategy after US President Joe Biden lobbied Saudi Arabia to boost production to tame energy-fueled inflation. The cartel led by Saudi Arabia and Russia has resisted US pressure to...
This post was originally published on this siteThe firm reported profits of $8.45bn in the second quarter of the year as oil and gas prices jumped.
This post was originally published on this siteJune inflation data remained hot amid higher gas and energy prices.
President Biden on Wednesday announced his support for a three-month federal gas tax holiday, or a suspension of the federal gasoline tax, in hopes of mitigating rising energy prices plaguing Americans nationwide. But even if such a measure passed Congress (which it’s unlikely to do, as Politico notes), would it actually make a difference?
Politically, it could offer a boon to Biden
A gas tax holiday would be “politically popular” (remember, it’s an election year!) and also “allow the White House to show that Biden is taking tangible action to address one of the biggest headaches facing families,” Matt Egan recently wrote in CNN. Though relief would be “modest,” a tax holiday on fuel could lower retail prices by as much as 18 cents per gallon of gas and 24 cents per gallon of diesel. At the very least, a tax holiday could cut families some sort of break while the administration works on a more permanent fix, per NPR.
This won’t actually make a difference — in wallets or in the polls
But speaking of modest relief …
With potential savings that clock in at “less than 5 percent of the total cost” at the pump, some experts worry “consumers may not even notice” a tax holiday, wrote The New York Times. And maybe, those who do would be the wrong ones. Though gasoline accounts for a greater share of working Americans’ expenditures, “rich people spend much more money on gas than poor people,” Henry Grabar argued for Slate in March. That means “there are fairer ways to help low-income Americans make ends meet — and smarter ways to target gas price relief to help important, inflation-fueling industries like agriculture and shipping.”
It will just make prices, and inflation, worse
In addition to having perhaps just a modest effect on wallets, “almost everything about a gas tax holiday runs in the wrong direction,” including its overall effect on prices, Senior Contributor Howard Gleckman mused for Forbes on Wednesday. While a tax suspension would “lower the after-tax price of gas,” it would in turn boost demand, thus worsening supply shortages and raising fuel’s pre-tax price, Gleckman wrote. “Any net benefit for drivers would be very small,” he added.
And The Hill Opinion Contributor Maya Macguineas agreed: While a gas tax holiday might offer “temporary relief at the pump,” it would ultimately just “exacerbate inflationary pressures” and present politicians with an opportunity “to pretend they are making the situation better, when in fact they are making it worse,” she posited in February. As Gleckman also noted, “oil producers and gas stations are likely to respond to the holiday by raising the pre-tax price of gasoline,” meaning the “largest beneficiaries” of the suspension may very well be the same oil producers Biden has continuously derided.
“By making gas cheaper that allows people to buy more of it,” explained economist Carola Binder, as quoted by NPR. “It’s giving them a tax cut and that gives them more to spend elsewhere. So that is going to lead to more inflationary pressures elsewhere.”
It takes money away from infrastructure
The gas tax funnels money into the Highway Trust Fund, which pays for improvements to roads, bridges, and other pieces of the nation’s infrastructure. But the fund, which is not indexed for inflation, is already close to insolvency — and a tax holiday “will only compound this problem,” the Bloomberg Opinion Editorial Board argued in February.
Under a suspension, “the cost of repairing and maintaining highways will rise along with inflation while the trust fund is depleted all the faster,” the board opined. And that’s without mentioning that “declining gas tax revenue” has already “forced the U.S. to transfer hundreds of billions of dollars of general fund revenue into the Highway Trust Fund over the past decade,” Grabar wrote in Slate.
Simply “robbing Peter to pay Paul would still increase the size of our massive federal debt and undermine efforts to assure sustainable infrastructure financing,” Macguineas added.
And what about the climate?
On top of everything else, a federal gas tax would serve to “amplify the climate crisis and slow the development and adoption of cleaner technologies,” Macguineas continued in the Hill. The country should be moving in the “opposite direction” instead, perhaps “replacing or supplementing the gas tax with broader carbon pricing” that would “efficiently reduce emissions and encourage new technologies,” she suggested. A gas tax holiday would just “slow progress” in this area.
Ultimately, the suggestion is merely a political move offering “a short-term gain with a long-term cost to infrastructure and the climate,” added the Los Angeles Times Editorial Board in February. “Voters can recognize a gimmick when they see it.”
This post was originally published on this siteInflation is the top issue for voters as fall’s midterm elections near. Biden wants Congress to suspend the gas tax until the end of September in a bid to give consumers some relief.
President Biden on Wednesday sent a letter to leading oil refiners calling for them to produce more gasoline and dial back record profits to help bring down fuel prices, which have been soaring since Russia invaded Ukraine in February. Biden said oil companies’ profits have tripled since the war triggered sanctions against Russian oil and disrupted global supply. “The crunch that families are facing deserves immediate action,” Biden wrote. “Your companies need to work with my administration to bring forward concrete, near-term solutions that address the crisis.”
Just days earlier, the national average climbed above $5 per gallon, adding to broader concerns about high inflation. The Commerce Department reported Friday that consumer prices had risen 8.6 percent in May, compared to a year earlier, marking the worst inflation in four decades. Biden noted that gas prices were 75 cents per gallon lower last year when oil prices were roughly the same as they are today, around $120 per barrel, and he put part of the blame on refiners’ high profits. The American Petroleum Institute responded with a statement saying U.S. refinery capacity has fallen as the Biden administration pushed to reduce fossil-fuel use as part of its effort to fight climate change. Is Biden right to scold oil executives for the pain Americans are feeling at the pump?
It’s fair to call out oil companies
Biden’s burdens on refineries and his canceling of the Keystone XL pipeline might hurt production in the future, says Will Daniel at Fortune, but that’s not why pump prices are rocketing up now. The current problem is due to a “pandemic-driven mismatch of supply and demand,” oil-market disruption due to Russia’s invasion of Ukraine, obstacles to cranking up oil production, and, yes, “record profit margins from oil and gas companies,” which Jay Hatfield, chief investment officer of Infrastructure Capital Management, says account for $1-per-gallon in the current run-up at the pump.
Actually, Biden’s the one to blame
What “a lot of drizzly nonsense,” says Ed Morrissey at Hot Air. Refiners’ profit margins are modest. Marathon’s was 3.8 percent in the first quarter. ExxonMobil’s was 6 percent. BP had a loss. The real reason for rising gasoline costs, according to industry groups, is “regulatory hurdles that prevent any expansion of refining capacity, along with policy hostility that keeps scaring off investors.” If Biden really wants to help, he should rescind his Executive Order 13990, which canceled the Keystone XL pipeline and directed federal agencies to review every Trump-era regulation that conflicted with Biden’s climate agenda, making it nearly impossible for refineries to expand operations.
Recognizing the need for more refineries is a first step
Maybe this call to jumpstart refineries means Biden is realizing what’s sending gas prices sky-high, says The Wall Street Journal in an editorial. “At least he’s finally noticed the dearth of refining capacity to process crude, which some of us have warned about for years.” U.S. refining capacity plunged by one million barrels a day in the coronavirus pandemic, and even with a few new refineries in Asia, the International Energy Agency says global capacity dropped by 730,000 barrels a day last year. “A major culprit is U.S. government policy,” which has forced some older refineries to shut down because “companies couldn’t justify spending on upgrades as government forces a shift from fossil fuels.”
There is a better way to fight inflation
“Biden can’t flip a magic switch to increase the gasoline supply or otherwise bring down prices at the pump,” says Eric Boehm at Reason. Pumping more oil and increasing refinery output “takes time and money,” and energy companies aren’t going to make that investment while the government’s long-term goal is reducing fossil fuel use. “But there is one magic switch that Biden could flip tomorrow to save the average American household about $800 annually: He could repeal the tariffs imposed by former President Donald Trump on steel, aluminum, solar panels, and many other goods imported from China.” That won’t won’t solve the inflation problem — that will take higher inflation rates or a “debilitating recession” — but tariffs are contributing to high prices and eliminating them will help.
This post was originally published on this siteThe Energy Department sent an invitation to oil industry executives Wednesday night to meet next week to discuss high gas prices, an official familiar with the matter tells CNN.