Will a Fuel Tax Holiday Provide Relief?

• July 5, 2022
• Nathan Logan

President Biden recently called for a fuel tax holiday to help reduce the costs at the pump. Will it help? Sure, a little bit. A little bit are the key words. The President is pushing for a three-month holiday that would remove the federal fuel tax. Currently, the federal tax is 18 cents per gallon of gasoline and 24 cents per gallon of diesel. The average price of a gallon of regular gasoline is hovering between $4.50-$5.50 for much of the U.S. while the average price of a gallon of diesel is just shy of $6. The fuel tax portion of that is 3-4% on gasoline and 4% on diesel. The cost to fill up will still be high.

Let’s look at an example. If you fill up your 5,000 gallon diesel storage tank today, the national average price per gallon of diesel is $5.77. Assume no discounts for simplicity. That cost to fill your tank would be $28,850. The price of diesel without the fuel tax would be $5.53 per gallon so the revised cost to fill the tank would be $27,650. The savings would be $1,200. A little bit. Yes, a little bit helps but in the grand scheme of things there are other forces at work that need to change to bring down the prices in order to feel true relief. I filled up my truck recently, which wasn’t on empty, and the total was over $100. Ouch! These prices are hard on the average family and a 3-4% cut in the cost will unfortunately, not be a significant help.

For transportation companies, fuel surcharges should be the saving grace. If it’s not, consider reviewing and potentially modifying your surcharge to ensure costs are being passed along to protect your profitability.

Sources: gasprices.aaa.com

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