President Joe Biden proposes to temporarily suspend collection of the federal gas tax as a palliative for voters irritated and injured by high and rising gasoline prices. This is a bad idea and the wrong policy.
The problem isn’t that there isn’t enough money. The problem is that there isn’t enough gasoline.
The price pressure on gasoline is not coming from retailers. Your local gas station may have the name of a famous oil company on the sign, but chances are this is only a matter of branding: Exxon, for example, does not own Exxon-branded gas stations. The entrepreneurs who operate most of our gas stations and convenience stores usually make little money — and, in some cases, no money — from gasoline sales. They make their money from soda, cigarettes, and lottery tickets, and try to lure customers into their stores with low gasoline prices. In fact, the average profit margin for gasoline sales is a measly 1.4 percent — that low profit margin is why oil companies got out of the gas-station business.
So, don’t blame the guy who owns your local 7-Eleven franchise. The problem is upstream.
There is general inflation across practically all sectors — food, energy, consumer goods — driven by the destructive combination of unusually high government spending around the world (driven in large part by Covid-era emergency spending that has, predictably, outlasted the emergency); reckless monetary policy by the Federal Reserve Board; persistent disruptions in global supply chains, the result of Covid-era production shutdowns; and political factors including Vladimir Putin’s barbarous assault on Ukraine, formerly one of the world’s largest exporters of wheat and food oils.
The United States, currently the world’s largest producer of oil and gas, is well-positioned to endure in such conditions, but there are destructive political factors at play here, too. Oil and gas producers have not ramped up production as much as might have been expected in response to rising energy prices, because they are not convinced that it is going to be worth the expense. Oil and gas production is not a light-switch that can be turned on and off as needed with no cost. A large expansion of domestic production would require large investments, as would a large expansion of domestic refining capacity. U.S. oil production is up slightly since Joe Biden took office in January of 2021, but fossil-fuel producers have taken note of Democrats’ promise to eventually put them out of business, and they fear that the campaign against them will resume and intensify once politicians have stopped hearing angry constituents complaining about gas prices. How many billions of dollars of your own money would you invest in an industry that your government proposes to annihilate?
But it isn’t only hypothetical future Democratic policies that are a problem. Past and present Democratic policies are a problem, too. The Democrats’ war against energy infrastructure has left the United States with insufficient pipeline capacity and effectively no ability to move fuel from port to port on tankers. That is a problem because, as our readers in Manhattan may have noticed, the oil refineries are not located in the large urban population centers where most gasoline is consumed. That is why, to take one illustrative example, much of the gasoline produced by Gulf Coast refineries is exported to Mexico rather than sold to domestic buyers. It matters how much gasoline you have, but it also matters where it is. President Biden has shown himself to be an implacable enemy of new pipeline construction, and, like every one of his Democratic predecessors going back to Woodrow Wilson, he supports protectionist regulations such as the Jones Act that have almost entirely eliminated port-to-port maritime transport of fuel and other goods within the United States. Biden is all too willing to knuckle under both to the environmentalists who want to stop any new conventional-energy development and to the labor bosses who don’t want to see the ports modernized and automated, which might eat into their discretionary funds.
If Joe Biden wants to get rid of the federal gasoline tax, there is a good argument for doing so, and he might find some Republicans interested in talking about it. But if Joe Biden wants the United States to have a more productive, more flexible, more efficient energy industry — one that can more readily absorb shocks such as the ones currently roiling the world economy — then that means giving producers and investors the stability and predictability they need to invest in wells, refineries, pipelines, and the rest of the vast industrial apparatus on the other side of the gas pump. The part where gas stations sell gasoline to suburbanites filling up their Subarus is the last 1 percent of the business, and subsidizing that with a tax holiday is not going to get the job done.
As long as Democrats have eliminating the fossil-fuel industry in its entirety on their agenda, they cannot in good faith blame the industry for exercising financial caution when faced with a Democratic president and a Democrat-controlled Congress. We would very much like for the Democrats to grow up and get on board with an environmentally responsible real-world energy agenda rather than the utopian schemes that currently occupy their imaginations. They could start by admitting that it is more desirable from both an economic and an environmental point of view to move fuel through pipelines rather than on trucks or trains, that American natural gas could play an important role in reducing worldwide greenhouse-gas emissions by displacing coal if we would permit the development of the necessary export facilities, that expanding the U.S.–European gas trade would make a lot of Americans richer while making Vladimir Putin poorer, and that consumer gasoline prices in the United States are shaped by a global energy market in which the United States is very well positioned to become the most important player.
Or Joe Biden could continue acting like a complete ignoramus and pretend that this is a matter of “greed” rather than a matter of many years of bad policy and wishful thinking.