Its latest call to suspend the collection of fuel taxes has caused fierce controversy: not only cannot it ensure that the retail price of gasoline will fall, it may even further fuel U.S. oil prices.

The Paper reporter Yang Yang

The Biden administration has recently launched a number of measures to suppress oil prices, but with little effect. Its latest call to suspend the collection of fuel taxes has caused fierce controversy: not only cannot it ensure that the retail price of gasoline will fall, it may even further fuel U.S. oil prices.

When delivering a speech on U.S. gasoline prices on June 22, Biden announced a series of measures aimed at lowering oil prices. The first one called on Congress to suspend federal fuel taxes for the next 90 days. The current federal gasoline tax is 18 cents per gallon and the diesel tax is 24 cents per gallon. Biden believes that this move "can lower the price of gasoline and give American families a little relief." He also called on state governments to suspend state fuel taxes or use other relief measures to ease public pressure. The average state gas tax across the country is 30 cents per gallon, and "some states have already taken action." Connecticut and New York have temporarily suspended gas taxes, while Illinois and Colorado have postponed the tax. etc. were named and praised by Biden.

Biden said Republicans 's accusations of "restricting oil production" were nonsense. "We are expected to set a new production record next year." He once again asked oil companies to step up efforts to improve refining capacity, and boasted of his efforts to curb the rise in oil prices. A combination of actions, including the largest release of reserves in history, lifting summer sales restrictions on E15 ethanol-blended gasoline, and urging OPEC+ oil-producing countries to speed up production increases, are expected to bring gasoline prices down by at least $1.

But in the face of reality, this number is just a bubble.

The Biden administration is facing two conflicting goals: On the one hand, lower gas prices. On the other hand, the public is encouraged to reduce the use of oil and natural gas . So far, none of its attempts have significantly reduced fuel prices, and the White House's conversations with oil companies have been fraught with smoke.

Biden spoke on U.S. gasoline prices on June 22, calling on Congress to suspend federal fuel taxes for the next 90 days

Gas tax suspension: A brief respite?

Democratic Representative Peter DeFazio, chairman of the House Transportation and Infrastructure Committee, immediately criticized the suspension of fuel taxes. Achieving negligible results will leave a $10 billion hole in the Highway Trust Fund that needs to be filled if we want to continue repairing crumbling bridges, addressing the surge in traffic fatalities, and building a modern infrastructure system.” DeFazio said encouraging states to suspend gas taxes would also weaken bipartisan infrastructure laws by cutting into the funds states can use to improve infrastructure.

DeFazio proposed providing relief directly to consumers by “ending Big Oil’s price gouging and profiteering,” and again promoted the Stop Gasoline Price Gouging Tax and Rebate Act, which he co-sponsored with other members of the House of Representatives in March this year.

The Highway Trust Fund is the "money chest" for infrastructure development in the United States. The U.S. federal fuel tax has not been raised in nearly 20 years. In fact, for more than a decade, fuel tax revenue has been less than what is spent on highways and other public works, so much so that the Treasury Department's general fund has transferred money to a trust fund. to make up the difference. The 2022-2032 Budget and Economic Outlook released in May by the Congressional Budget Office (CBO) shows that from 2008 to 2021, the Highway Trust Fund's expenditures totaled more than its revenue, a difference of $159 billion. As a result, lawmakers authorized a series of transfers to the Highway Trust Fund, which has exceeded $275 billion since 2008, to avoid delays in funding state and local governments. Under CBO’s hypothetical scenario, the fund would be exhausted by 2027.

Biden has requested a three-month suspension of fuel taxes, and the approximately $10 billion in revenue lost to the Highway Trust Fund is destined to be made up only by "tearing down the east wall to pay for the west wall."

Suspending state gas taxes is not a panacea either.

The Paper noticed that The results of a study recently released by the University of Pennsylvania showed that end consumers in the three states that suspended state gasoline taxes did see a drop in gas prices: Maryland (72% of the tax exemption effect was transmitted to consumer side), Georgia (58%-65%), Connecticut (71%-87%). However, the price reduction effect of is not sustainable during the tax holiday, and the tax reduction benefits cannot all fall into the pockets of consumers.

Average gas prices in Maryland (blue line), Georgia (red line), Connecticut (yellow line) and other U.S. states (black line) from October 1, 2021 to May 16, 2022. Gasoline prices began to fall in mid-March in many states, including Maryland, Georgia, and Connecticut, before recovering in late April. In Maryland, gas prices fell 5% during the state tax exemption period from March 19 to April 18, but quickly climbed back higher after the tax holiday expired. In Connecticut, gasoline prices fell immediately after the tax holiday took effect on April 1, but the decline slowly narrowed and prices resumed their gains in mid-April, even though the tax holiday did not expire until the end of June.

John Thune, the “No. 2 Republican” in the U.S. Senate, teased that Biden’s proposal to “suspend the federal gasoline tax” is facing failure. "What the administration came up with was another gimmick, another 'Band-Aid,' and they knew it was going to be broken by the time it got to Congress."

Rick Joss, global head of oil analysis at S&P Global Platts Analytics Rick Joswick said that Biden's proposal to suspend fuel taxes has a difficult road to approval in Congress. The tax holiday will be equivalent to a 3.5% discount on gasoline, which may increase U.S. gasoline demand by about 1%.

JPMorgan Chase believes that the U.S. government’s intervention measures to artificially lower gasoline prices will offset some of the factors that inhibit consumption and will instead push up gasoline prices. The surge in gasoline prices can only be effectively alleviated when insufficient refining capacity and other supply issues are resolved. Proposed cuts to gasoline taxes, changes to biofuel blending requirements and restrictions on fuel exports would instead encourage people to drive more.

For this reason, the proposal also angered some environmentalists.

"Every administration facing high oil prices has considered the option of cutting the federal gas tax, but it has never been implemented," said Bob McNally, an energy official in the George W. Bush administration and now president of Rapidan Energy Group. The option seems simple, but in fact it may not be worth the candle. Much of the reduced 18.4-cent gas tax may be appropriated by refiners or fuel distributors, and may not even be passed on to drivers.

The White House and the oil industry are arguing from a distance

html On June 26, the average price per gallon of regular unleaded gasoline in the United States was US$4.9, an increase of 58% from a year ago. Facing an unprecedented energy crisis, Biden has repeatedly asked OPEC members, U.S. oil producers and refiners to increase production for several months, but has failed.

After recently sending a letter to the CEOs of seven top oil companies asking them to explain the decline in refining capacity, Biden also urged the U.S. Department of Energy to hold an emergency meeting with U.S. refiners. U.S. Energy Secretary Jennifer Granholm held a face-to-face meeting with executives from seven major oil companies for about an hour on June 23. However, in addition to both sides saying after the meeting that the dialogue was "productive," the meeting No substantial results were achieved.

The U.S. Department of Energy announcement said Granholm reminded oil companies that their consumers, workers and communities are suffering from price increases caused by Putin at a time when Putin is using energy as a weapon. Solutions must be provided to ensure safe and affordable supply. The meeting discussed initiatives being taken by oil companies to maintain refining capacity; technical, economic and policy barriers to increasing domestic refining capacity; and the need to reinvest in current and future technologies.

The American Petroleum Institute (API) and the American Fuel and Petrochemical Manufacturers (AFPM) issued a joint statement after the meeting that the Department of Energy had constructive discussions with refiners, "but should send a positive signal to the market that the United States is committed to a strong The U.S. refining industry is investing for the long term and aligning policies to reflect this commitment. Our industry will continue to seek opportunities to work with policymakers to unlock American energy, drive economic recovery, and strengthen our national security.”

That’s not all. The American Petroleum Institute also joined 27 oil and gas associations and alliances to send a joint letter to the White House, inviting Biden to visit U.S. energy facilities before visiting the Middle East next month. "Your trip to Saudi Arabia next month is important in many ways, including promoting global energy supplies. However, the solution for American energy lies at our feet, and we recommend that you reconsider American oil and gas, the envy of the world Huge potential for resources."

Michael Wirth, chief executive of Chevron , the second-largest U.S. oil company, called the meeting with Granholm "constructive." However, just two days before the meeting, he said in an open letter responding to Biden's accusations that "Chevron's capital expenditures will increase to $18 billion in 2022, more than 50% higher than last year... Despite Despite these efforts, your administration has largely sought to criticize and sometimes even denigrate our industry. "

Exxon Mobil has also publicly responded to Biden's series of "charges." Mike Sommers, president and CEO of the American Petroleum Institute, responded by saying that current U.S. refinery capacity and output are close to the highs of the past five years, but demand still exceeds supply.

"It's unclear what refineries can do to help President Joe Biden. The U.S. has been struggling since the start of the coronavirus pandemic due to Biden's policies, onerous regulations and corporate investment decisions after the administration said it would end fossil fuels. Refineries have also lost about 1 million barrels per day of refining capacity and are switching to biofuel facilities. According to the Energy Information Administration, the remaining operating refining capacity is 17.94 million barrels per day, with capacity utilization reaching a record high of 90%. More than %." IER, a domestic energy research institute in the United States, wrote in an analysis report.

The Paper News query U.S. Energy Information Administration (EIA) data found that as of January 1 this year, the United States’ refining capacity dropped to 17.94 million barrels per day, lower than 18.09 million barrels per day on January 1 last year, United States Refining capacity is at its lowest level since 2014. After declaring the “end of the fossil fuel era,” canceling the Keystone XL project permit for the U.S.-Canada pipeline, canceling the auction of oil and natural gas drilling leases, and considering imposing a “windfall profits tax” on oil producers, Biden emphasized that “we need More refining capacity" will not be able to get out of the energy crisis in the short term.

Editor in charge: Li Yuequn