“‘It’s not the best idea. These are rising energy prices because they reduce the price to the consumer. And the law of demand says they will consume more if you lower the price.”
This is Jeff Currie, Goldman Sachs’ chief commodity economist, who gave a concise lesson on the Econ 101 during an interview with CNBC on Wednesday as he explained why the suspension of the federal gasoline tax is unlikely to offer very lasting relief to drivers who pay record prices at the pump this summer.
President Joe Biden was expected to ask Congress on Wednesday to suspend federal taxes on gasoline and diesel for three months. The move comes as gasoline prices hit a record high earlier this month, with the US average surpassing $ 5 a gallon for the first time before falling modestly.
The federal gasoline tax is 18.4 cents a gallon, while the diesel tax is 24.4 cents a gallon. If the federal gas tax was paused, truck drivers could save $ 5.52 each week, according to Patrick De Haan, head of oil analysis at GasBuddy. At the other end of the spectrum of the car, compact car drivers would save $ 2.21.
Biden was also expected to ask states to suspend their own gas taxes or offer similar relief, measures that several states have already done.
Reads: These states have already enacted gasoline tax holidays. So how effective have they been?
Meanwhile, political analysts argued that the White House is unlikely to get approval for the tax leave.
Biden is under pressure to address rising fuel prices and headline inflation ahead of this fall’s midterm congressional election. Meanwhile, markets indicated that there could be modest short-term relief for drivers.
Oil futures, which hit a three-month high in June, fell on Wednesday. West Texas Intermediate Crude for August Delivery CL.1,
the U.S. benchmark index fell 3.3 percent to near $ 106 a barrel. August Brent cru BRNQ22,
the world benchmark, fell 3% to about $ 111.30 a barrel.
RBN22 gasoline futures,
which traded at record highs above $ 4.30 a gallon in early June, down 0.9% to about $ 3.76 a gallon.
Currie said the drop in crude oil prices was probably due in part to growing fears of a recession, which have affected all asset classes.
He also said that the high crack spreads of all time – the difference between the price of a barrel of crude oil and the products that can be refined from it – explain why the focus is on fuel products rather than in the crude oil market.
“The administration is very aware of that,” Currie said. “That’s why it’s targeting products instead of crude oil. crude “.
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