MT. JULIET, Tenn. (DTN) -- President Joe Biden wants Congress to suspend federal gasoline and diesel taxes for 90 days and asked for states to do the same.
A potential pause on the collection of the 18.4-cents-per-gallon federal gasoline tax and the 22.4-cents-per-gallon federal diesel tax is aimed at reducing prices for consumers during the peak summer driving season, with the suspension running through the end of September.
The move could save farmers money as they empty grain bins ahead of harvest, but experts say it does little to address the supply shortfalls behind soaring prices and would have only a minor impact on prices at the pump.
According to AAA, the national average price of a gallon of gasoline was $4.96 on June 22, while a gallon of diesel cost $5.81, both just below record prices hit last week. Federal gas and diesel taxes go to the Highway Trust Fund, which is used to maintain roadways and public transportation. Biden's proposal would continue to fund the Highway Trust Fund with other revenues.
With both Democrats and Republicans expressing reservations about the plan, its passage is uncertain.
Mike Steenhoek, executive director of the Soybean Transportation Coalition, said another major headwind to Biden's plan is whether states will get on board. While some have already passed fuel tax holidays of their own, other states don't have full-time legislatures and may not be able to pass necessary legislation before the year is out.
Steenhoek used data from the American Petroleum Institute, Department of Transportation and EPA to generate examples of how much money a suspension of federal and state would save an average motorist and a hypothetical farmer on his trucking fuel needs.
He calculated that a suspension of federal gasoline taxes would save the average motorist 28 cents per day, or about $25 over the life of the suspension. When an average value for state gasoline taxes is included, that estimate rises to 88 cents per day, or almost $80.
Farmers' savings would be more pronounced than the average motorist.
"Farmers have a lot more round trips transporting grain or soybeans to and from the delivery location," he told DTN in a phone call. While it's hard to determine what's typical usage for a farmer because of wide variations between operations, he estimates a farmer could save 95 cents per day on diesel costs, or about $85, if only federal taxes are paused. If state taxes are included, the savings would be about $2.51 per day, or about $226 in total. Details on how Steenhoek arrived at these figures are below.
DTN Lead Analyst Todd Hultman said suspending the fuel tax would have mixed results.
"For most Midwestern row-crop farmers whose use of highway diesel picks up after the fall harvest, the suspended tax will likely have expired by the time they start hauling grain out of the fields," Hultman said.
If Biden's proposal goes into effect for July, August and September, Steenhoek said he thinks there will be pressure to extend the holiday. "I have a hard time believing that any elected official wants to see the fuel tax snap back on the eve of an election."
While many consumers will appreciate the small break in prices, "The suspension is also likely to encourage more demand than would otherwise be the case, nullifying part of the intended financial benefit to consumers and adding to the overall problem of demand exceeding available supplies."
Gregg Ibendahl, a Kansas State University Extension agricultural economist, said in a webinar that a gas tax holiday does nothing to address the root of the issue, which is lagging refining capacity. The U.S. has not built a new refinery since 1977, and some refineries went offline during COVID and never restarted again.
Until more refineries are built or existing ones are upgraded, Ibendahl is not very optimistic lower fuel prices will be seen anytime soon. "Things like a gas holiday or even tapping into strategic reserves are going to do very little to lower the price of fuel," Ibendahl said.
For more on why diesel prices are high, please read "Fuel Costs Pinch Farm Budgets" here: https://www.dtnpf.com/….
Steenhoek's calculations on potential savings from suspending fuel takes are below.
AVERAGE MOTORIST WILL SAVE 28 CENTS PER DAY ON FEDERAL TAXES
-- The average American annually drives 14,263 miles (source: U.S. Department of Transportation).
-- The average fuel economy is 25.4 miles per gallon (source: U.S. Environmental Protection Agency).
-- Americans on average pay 57.09 cents per gallon in gasoline taxes (18.4 cents per gallon in federal gasoline taxes + 38.69 cents per gallon in state gasoline taxes) (source: American Petroleum Institute). Of course, individual state gas taxes will be higher or lower than 38.69 cents per gallon average.
Therefore:
-- 14,263 miles ÷ 25.4 miles per gallon = 562 gallons of gasoline purchased each year
-- 562 gallons of gasoline x $0.5709 per gallon in gasoline taxes = $320.85 spent each year in gasoline taxes (federal and state combined). 562 gallons of gasoline x $0.184 per gallon in federal gasoline taxes = $103.41 spent in federal gasoline taxes alone.
-- $320.85 ÷ 365 days = 88 cents per day (federal and state gasoline taxes combined). $103.41 ÷ 365 days = 28 cents per day (federal gasoline taxes alone).
The average American will spend 88 cents per day (federal and state combined) on gasoline taxes -- 28 cents per day on federal gasoline taxes alone. Obviously, Americans will spend much more in total fuel costs, but 88 cents is the daily cost for gasoline taxes.
HYPOTHETICAL FARMER SAVES 95 CENTS PER DAY ON FEDERAL DIESEL TAX SUSPENSION
-- The average tax per gallon for diesel fuel is 64.64 cents (24.4 cents per gallon in federal diesel taxes + 40.24 cents per gallon in state diesel taxes) (source: American Petroleum Institute). Of course, individual state diesel taxes will be higher or lower than 40.24 cents per gallon average.
-- 135,000 total bushels produced (110,000 bushels of corn + 25,000 bushels of soybeans). 600 acres of corn x 183 bushels per acre = 110,000 bushels. 400 acres of soybeans x 50 bushels per acre = 25,000 bushels. Of course, many farmers produce significantly more or fewer bushels.
-- Utilizing a 5-axle, 80,000-pound semi (many states have higher weight allowances, but 80,000 pounds is a common weight limit), the farmer would require 114 trips for corn (964 bushels per load) and 28 trips for soybeans (900 bushels per load). Total trips = 142.
-- If the delivery location is 25 miles from the farm (50 miles roundtrip), 7,100 miles would be driven to deliver the total farm production. Of course, some farmers drive significantly longer or shorter distances to access their preferred delivery location.
-- If the average miles per gallon for the semi-truck is five, 7,100 miles ÷ 5 mpg = 1,420 gallons purchased.
-- 1,420 gallons purchased x $0.6464 = $917.89 spent each year in diesel taxes (federal and state combined). 1,420 gallons x $0.244 per gallon in federal diesel taxes alone = $346.48.
-- $917.89 ÷ 365 days = $2.51 per day (federal and state combined). $346.48 ÷ 365 days = $0.95 per day (federal diesel taxes alone).
This particular farmer would therefore save 95 cents a day by just a federal suspension of the fuel tax and $2.51 cents per day if both federal and state diesel taxes were suspended.
DTN Staff Reporter Russ Quinn contributed to this article.
Katie Dehlinger can be reached at
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