It's all hands to the pump as the US (and the rest of the world) looks to reign in rising inflation and rapidly increasing prices for household goods, including fuel. Unfortunately, just like most of the world, fuel prices are rocketing and up by $2 to the gallon in the US, putting a squeeze on the car-loving nation. US President has therefore proposed to suspend the country's federal gas tax for three months.
As it stands, the federal tax currently is 18.4 cents per gallon on gas and 24.4 cents per gallon on diesel fuel. If gas savings were fully passed along to consumers, Americans would save roughly 3.6% at the pump, with prices averaging about $5 a gallon nationwide. The Biden administration is asking Congress to fund the $10 billion cost of the proposal by tapping into other sources of revenue, which will not affect the Highway Trust Fund. The White House is also encouraging states to take further action to reduce gas prices, citing several states' gas tax holidays as examples. The idea, however, has been scorned by analysts, while Obama back in '08 called it a gimmick.
High gas prices pose a fundamental threat to Biden's electoral and policy ambitions. They've caused confidence in the economy to slump to lows that bode poorly for defending Democratic control of the House and the Senate in November. Biden's previous efforts to stem the tide of oil prices came by releasing more barrels from the US reserve alongside greater ethanol blending – all of which have made little change at the pump. Mark Zandi, the chief economist at Moody's Analytics, estimated that the majority of the 8.6% inflation seen over the past 12 months in the US comes from higher commodity prices due to Russia's invasion and continued disruptions from the coronavirus.