Trump says he supports a suspension of the gas tax. Here's what it would mean for your wallet
Gas prices have climbed about 50% since the start of the Iran war.
President Donald Trump on Monday voiced support for suspension of the federal gas tax as the White House looks for ways to ease a surge in gas prices set off by the war with Iran.
A repeal of the tax – which amounts to 18.4 cents a gallon of regular and 24.4 cents a gallon of diesel – would require a vote in Congress.
The potential relief comes as the stock market hits record highs and some oil companies report soaring profits. Households, meanwhile, are being pinched by higher fuel prices, airfare and other expenses. Inflation stands at its highest level in three years, fresh data on Tuesday showed.
Gas prices, meanwhile, register about 50% higher than they did before war broke out two-and-a-half months ago.
A suspension of the federal gas tax could lower prices by nearly 20 cents a gallon for regular, but it would amount to a small dent in the price hike set off by the Iran war, some analysts told ABC News.
The price of an average gallon of gas stood at $4.50 as of Tuesday, AAA data showed – an increase of $1.52 per gallon since the war began on Feb. 28.
If gas stations passed the full tax savings along to consumers, then it would eat away about 11% of the rise in prices that has taken hold since the war began.
"It would provide pretty minimal relief to the average consumer," Dominic Pappalardo, chief multi-asset strategist at Morningstar Investment Management, told ABC News.
Assuming an 18-gallon gas tank, the cost of filling up an empty tank increased from $53.71 on Feb. 28 to $81 as of Tuesday. In other words, it costs about $27 more each time an individual fills up an empty tank than it did before the war, according to analysis shared with ABC News by Omair Sharif, founder of Inflation Insights.
If a car owner were to fill up his or her tank once a week, then the annual added fuel cost would amount to about $1,419.
A suspension of the gas tax would save a driver about $3.24 each time he or she filled up an empty tank, assuming gas stations were to pass along the full tax savings to consumers. Over the course of a year, the suspension of the tax would save drivers about $168.
On Monday, Trump acknowledged that suspending the gas tax would not substantially decrease costs for Americans.
"It's a small percentage, but it's, you know, it's still money," Trump said in the Oval Office.
A suspension of the gas tax could also reduce the price of diesel fuel, helping ease wholesale costs for groceries, furniture and just about every other product delivered by diesel-fueled trucks and container ships, Ramanan Krishnamoorti, a professor of petroleum engineering at the University of Houston, told ABC News.
The price of food at home jumped 0.7% in March from February, reversing a 0.2% decrease from the previous month, government data on Tuesday showed. Prices for fresh fruits and vegetables -- which are particularly sensitive to diesel costs -- surged 2.3% in April from March.
The price of an average gallon of diesel stood at $5.64 on Tuesday. The suspension of the gas tax would reduce the price by 24.4 cents a gallon, assuming gas stations were to pass along the full savings to consumers. That would amount to a 4% reduction in the price of diesel.
The savings would be "very small," Krishnamoorti said, but he noted the price reduction could provide some relief for shoppers at grocery stores and malls.
Substantial relief at the pump will only begin to arrive if tanker traffic resumes in the Strait of Hormuz, alleviating a historic oil shortage, Krishnamoorti said. That outcome, he added, would likely require a resolution of the war.
"The most important thing to find a way to reduce gas prices is to have this war end," Krishnamoorti said.
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