Calls for ‘gas tax holiday’ grow, but some analysts think it’s a bad idea

VERNAL, Utah — Record-high gas prices have people all over the U.S. asking the federal government to temporarily get rid of the federal gas tax.  However, some local industry analysts say that could hurt us in the end, making us pay more than we are now. 

Gas tax holiday

Currently, the federal gas tax is 18.4 cents per gallon, according to officials with the Utah Petroleum Association. ABC News reports a growing number of governors and state lawmakers across the country are calling for a “gas tax holiday” to ease prices at the pump.  Governors in Colorado, New Mexico, Michigan, Minnesota, Pennsylvania and Wisconsin all signed a letter to congressional leaders asking them to get rid of the tax through the rest of the year.

However, Mike Holmes with the Uintah Basin Small Business Development Center says people shouldn’t get too excited about any kind of gas tax holiday.  He has been tracking oil leases and well development in eastern Utah for over a decade.  He says some new wells have been started in Utah, but those wells won’t produce crude oil right away.

Holmes said, “We’re doing some drilling now, but it will take months to bring that petroleum product to market.”

If prices are to fall, demand for gas must also

He believes the most effective way to bring gas prices down significantly is to reduce the demand, and he doesn’t think people will stop driving, for the most part.

“The only reason we’re paying as much as we are now is because people are willing to pay that,” Holmes said.

If the federal government were to temporarily get rid of the tax, Holmes says that may encourage people to buy more gas, thus increasing the demand.

He said, “You may drop that federal gas and [prices] may only stay there for a couple of days.  Then, the price of fuel goes right back to where it’s at because the refineries are trying to supply all the demand.”

Then, he asks, what will happen when the federal government decides to bring the tax back?

He said, “Now, the price is higher than it was before.”

Holmes isn’t the only person who believes a gas tax holiday would be a bad idea.  An op-ed written for the Deseret News says manufacturers have to set their price where the supply matches demand.  Plus, it states highway construction projects would be impacted, since they rely on funding from the federal gas tax.

Read more:

• Oil industry insiders say Biden will have to make big changes to bring Utah gas prices down
• Gas prices will get worse, Utah congressman warns