As travelers prepare to hit the road for summer vacation, gas prices are still sky-high and President Joe Biden is proposing a temporary suspension of federal gas taxes.
Economists disagree about whether gas tax breaks really do much for the average American. But one thing is certain – consumers who have no choice but to drive are in pain.
Owners of the best-selling vehicle in the US, the Ford 150 pickup truck, are now paying $157 more per month to fill up at today’s $5 per gallon, compared to 2021 when prices averaged $2.20 per gallon , according to a new report from the Federal Reserve Bank of Dallas.
“If prices rise higher, expect consumers to respond by cutting fuel consumption and overall spending sooner rather than later,” said Garrett Golding, senior economist at the Dallas Fed.
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Meanwhile, higher diesel prices are weighing heavily on agricultural production and in turn driving up grocery store prices, the Dallas Federal Reserve Bank said in a statement.
The report says a farmer will pay $27,500 today to harvest 1,000 acres of corn at 5 gallons of diesel fuel per acre, up from $16,400 in 2021.
The increase in prices is due to the fact that summer travel is already in full swing. AAA Texas predicts that 3.5 million Texans will travel 50 miles or more from home over the holiday weekend. This is 3% more than in 2021.
“Summer travel is in full swing: more Texans than ever expected will be traveling by car this Independence Day,” said Kent Livsay, vice president of AAA Texas. “Demand for travel has been on the rise since the beginning of this year and is not declining. Texans are ready for a break, and even though things cost more, they’re still ready to take a much-needed vacation.”
Biden is proposing to suspend the 18.4 cents per gallon tax, which has been in place for 29 years and contributes to the Highway Trust Fund.
“The federal tax suspension will likely result in some reduction in gasoline prices to the extent that the savings are passed on,” said Ray Perryman, a Waco economist. “It will also reduce the funds allocated for infrastructure construction, although there are ways to compensate for this within the federal budget.”
Overall, demand for gasoline has declined year-over-year as a result of rising prices, although demand is likely to be relatively strong in the summer as people take advantage of the opportunity to travel more freely, Perryman said.
“There are both supply-side and demand-side factors that will start to put downward pressure on gasoline prices, but prices are likely to remain high in the summer months,” he said.
Under the White House proposal, the average driver of a large SUV — one of the most popular vehicle types in the country — would save about $4.60 a week, according to calculations by GasBuddy, which tracks fuel prices nationwide.
This will amount to about $239 per year, although gas is unlikely…
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