Oil prices and the consequences of eliminating gas taxes

Oil prices and the consequences of eliminating gas taxes

“Gas prices today are much higher than their average prices 30 years ago, when taking into account the average price increase,” Gilbert Metcalf said. Yes: Shutterstock

Gas prices are rising these days – more than $ 4 a gallon – and some states have raised their gas taxes to give consumers a price boost. But how high will gas prices be today, if we adjust to inflation? And would abolishing the state gas tax make a difference?

To understand the issues, Tufts Now spoke with Gilbert Metcalf, a professor of education and John DiBiaggio Professor of Citizenship and Public Service at Tufts. He is an expert in energy and environmental policies, and has reprinted an article for EconoFact on the consequences of lowering gas taxes.

Tufts Now: Adjusted for inflation, how high are gas prices today compared to 10 or 20 years ago?

Gilbert Metcalf: Gas prices today are much higher than their average prices 30 years ago, when it comes to price growth.

Even with the recent spike, higher gas prices were driven by inflation in the spring and summer of 2008, and most of the months from 2011 to the summer of 2014. The most different situation is the lowest inflation rate after this, in the five years starting in February 2016.

What explains the current spike, and will it continue?

Russia’s invasion of Ukraine is a major responsibility. Gas prices rose by about 20% in nominal terms – that is, not adjusted for inflation – in the two weeks after the attack on Ukraine on February 24th.

However, prices have really started to rise over the past year with the start of the economy since our COVID replacement. It’s hard to predict what’s to come with prices. But in the second half of March 2022, gas prices began to decline, falling by 1.6 percent while rising.

Some have called for the abolition of gas taxes to give consumers a break at the pump. How many customers will save, and are things down that way?

The average state and federal gasoline excise tax rate is $ 0.48 per gallon. Abolishing federal and state fuel taxes would cut the price of oil by about 10 percent. So this is not a panacea for consumers.

Now, tax cuts will encourage oil consumption as we reduce our reliance on oil products will reduce our vulnerability to oil shocks from geopolitical events. such as the Russian war in Ukraine and help reduce climate change.

In addition, tax revenue is needed for the repair and maintenance of the roads and highways of our nation. Among other things, the American Society of Civil Engineers has given poor grades to the country’s roads and bridges, and an estimated $ 786 billion backlog of highways and capital bridges is underway. needs to be done by 2021. Cutting the gas tax will reduce revenues spent on improving the automotive industry.

The Harvard economist is weighing the latest inflation data

Presented by Tufts University

Directions: Oil prices and effects of gas tax exemption (2022, April 4) Retrieved 4 April 2022 from https://phys.org/news/2022-04-gasoline-effects -gas-taxes.html

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