Gas prices are going up. Critics of the Biden administration and the Democratic leadership in Congress are using these hikes to point to permanently higher prices that taxes and regulations would usher in.
According to the Energy Information Administration’s weekly survey, all grades of gasoline climbed from $2.93 a gallon on April 12 to $3.11 on May 17. Over that same period, diesel climbed from $3.12 to $3.24 a gallon.
There were also recent temporary widespread fuel shortages in many states, as a hacking attack shut down the Colonial Pipeline that supplies gasoline to the east coast.
The price of diesel, in particular, matters because semitrucks run on diesel. An increase in the diesel sticker price thus increases the costs of freight transportation. That can lead to higher price tags for a broad basket of goods.
“Increasing the excise tax on gasoline and diesel fuel would have an immediate negative impact on the economy and on taxpayers nationwide. Shippers, who directly pay the tax, would add those higher costs on to distributors, who will add those costs to merchants, who will ultimately pass some of those costs on to the sticker price of goods on their shelves,” Thomas Aiello, director of federal affairs at the watchdog group National Taxpayers Union, told the Washington Examiner.
“Sure, shippers will nominally pay the tax, but it is consumers who will see higher prices at the checkout counter. Plus, with the concerning rise in inflation, raising the gas tax is the last possible thing that should be on the table,” he warned.
According to freight support company DDC FPO Solutions, the fuel price “impacts so much more than just the transportation industry, such as the economy, politics, the environment, globalization, and technological development. These effects typically result in higher costs for shipping products that are time-sensitive or that need refrigeration.”
The Biden administration is not currently advocating for a raise in the federal excise tax on gas and diesel as part of its infrastructure plans. Yet that does not mean President Joe Biden wouldn’t sign off on one should the bill hit his desk.
At the moment, the administration is taking a more industry-specific approach. The president issued an order directing all agencies to end all subsidies for fossil fuels, reversed the Trump administration’s late-in-the-game methane regulations, and made moves at the Securities and Exchange Commission in preparation for forcing gas companies to do Environmental Social Governance and other climate-related disclosures.
Jeff Salinger and Dante Alessandri, of the global law firm DLA Piper, write that “while these changes primarily aim to reduce the nation’s carbon footprint, they will also add an additional layer of regulations for oil and gas operations and will sharpen public attention on oil and gas companies.”
Many Republicans in Congress believe that some of these actions are unfair, that worse is yet to come, and that Congress and the administration together will likely do real harm to an industry that people depend on.
A group of 55 House Republicans sent a letter to the House leadership on May 13 warning that “despite significant areas of agreement” by both parties on spending large sums of money on new infrastructure, “another partisan approach is being contemplated to ram through a lengthy list of progressive policies and backbreaking tax increases.”
The 55 Republicans further warned that “many of these proposed and devastating tax hikes are punitive measures targeting the oil and gas sector and the 11 million high-paying jobs supported by the industry” and argue that much of what is being characterized as handouts are actually typical of the way that the federal government and most large industries do business.
“Oil and gas producers are being falsely characterized as the beneficiaries of ‘tax subsidies’ and ‘loopholes.’ President Biden’s infrastructure plan calls to ‘eliminate tax preferences for fossil fuels, and corresponding Democrat legislative proposals leave no question as to what is slated for removal. For example, lawmakers are pushing to remove essential provisions like Intangible Drilling Costs and Percentage Depletion, which are crucial tools for weathering a volatile and unpredictable industry,” the House Republicans warned.
Yet a few of the things labeled as subsidies to the industry probably are what most people would regard as actual subsidies. Free shipping lanes, for instance.
“The federal government spends over $700 million each year constructing and maintaining shipping lanes on rivers, which are often used for the transportation of oil and gas,” writes Salinger and Alessandri. “Under President Biden, the federal government may require companies, including heavy users such as oil and gas companies, to fund all or a portion of the construction and maintenance of these shipping lanes.”
Whatever form it takes, Republicans charge that Democrats in the administration and Congress are hellbent on passing some additional costs on to the oil and gas industry. They make the knock-on point that one way or another, those costs are likely to be borne by consumers.
