Key insights
- A potential suspension of the US federal gas tax offers limited relief given the larger surge in energy prices since the Iran war. The conflict's impact on oil supply through the Strait of Hormuz is a key driver, contributing to broader inflation concerns. Failure to resolve the conflict could push gas prices to $5/gallon, further straining consumer budgets and weighing on the economy.
%3Amax_bytes(150000)%3Astrip_icc()%2FFourOhSix-cf7225de781d4218b35dc60a809f72cb.png&w=3840&q=75)
Get personalized, AI-powered answers built on 27+ years of trusted expertise.
A suspension of the federal gasoline tax would push down prices at the pump, but do little to make up for the financial damage the energy crunch has caused to household budgets since the Iran war began.
Temporarily halting the 18.4-cent-per-gallon levy—as President Donald Trump and Republican lawmakers have proposed—would save motorists some money. However, the amount would be a relative drop in the bucket.
As of Tuesday, a gallon of regular unleaded averaged $4.49 nationwide, up from around $3 before the war, according to GasBuddy's price tracker. To put it in perspective, the gas tax would have to be suspended for 406 days just to make up for the extra $28 billion U.S. motorists have paid since the war began, Patrick DeHaan, head of petroleum analysis at GasBuddy, posted on social media Monday.
A temporary tax cut would fall short of solving the energy crisis caused by the Iran war, leaving at-the-pump prices well above prewar averages and continuing to drag on the economy.
Energy prices have surged because the conflict has effectively closed the Strait of Hormuz, the crucial waterway through which 20% of the world's supply of crude oil normally flows.
The spike in fuel prices is a major reason inflation accelerated in April, with consumer prices rising faster than workers' pay raises for the first time in a year. Further price hikes could be in store if Iran and the U.S. do not strike a peace deal in the coming weeks.
"If the Strait doesn't re-open soon, I believe we could see the national average price of gasoline reaching $5/gal as early as sometime in June," DeHaan wrote.
Prices are still short of the all-time high average of $5.02 reached in 2022 after the Russian invasion of Ukraine. Former President Joe Biden similarly proposed a gas tax holiday, but the idea ran aground in Congress, where it failed to gain enough support to become law.
Get personalized, AI-powered answers built on 27+ years of trusted expertise.