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03/21/2022

States Take Action to Alleviate Pain at the Pump

The national average price per gallon dips from a high on March 11.
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A gas pump

CHICAGO — Two states are implementing a gas tax holiday as high gas prices continue to plague motorists.

Maryland Gov. Larry Hogan signed emergency bipartisan legislation to immediately suspend the state's gas tax for 30 days. With the move, which both the state House of Representatives and Senate passed with unanimous support, Maryland became the first state to enact an immediate suspension of the gas tax.

"This bipartisan action will provide some relief from the pain at the pump and it is possible because of the prudent fiscal steps we have taken, which have resulted in a record budget surplus," Hogan said. "This is, of course, not a cure-all, and market instability will continue to lead to fluctuations in prices, but we will continue to use every tool at our disposal to provide relief for Marylanders."

The emergency legislation applies to the 36.1-cents-per-gallon tax for gasoline, and the 36.85-cents-per-gallon tax for diesel fuel. On March 17, the governor submitted a supplemental budget to fund the gas tax suspension, which is expected to cost nearly $100 million.

Hogan has also expressed support for legislation pending in the General Assembly that would suspend automatic increases in the gas tax, and he has called on the federal administration to increase domestic energy production.

Following Maryland's action, Georgia Gov. Brian P. Kemp signed HB 304 on March 18 to temporarily suspend the state's excise tax on motor fuel sales. The law will remain in effect through May 31. State Reps. Jodi Lott (R-District 122) and Chuck Hufstetler (R-District 52) sponsored the bill.

"With gas prices up by at least 59 percent in a year, [and] D.C.'s pandemic politics further driving inflation, Georgia's families need [and] deserve all the relief we can give them. Today, I signed HB 304, temporarily halting the state's gas tax," Kemp wrote on Twitter.

Other states are also taking aim at gas prices. In California, which has the highest gas prices in the United States, Gov. Gavin Newsom proposed a tax rebate in his "State of the State" address March 8.

Newsom is planning to submit a revised budget to the state legislature that would "put money back in Californians' pockets to address rising gas prices," but he did not immediately offer any details of how much a rebate would be or when he hopes it could hit bank accounts, CNN reported.

In Michigan, Gov. Gretchen Whitmer voiced her support for a short-term pause in the state's sales tax on motor fuels but did not indicate how long the pause would last. Her support came after she vetoed legislation that would have suspended the state gas tax for six months — a move that would not have gone into effect until next year, Fox 2 Detroit reported.

"A short-term pause is a fiscally responsible action we can take that will provide drivers relief at the pump right now — not next year — while also protecting funding for road repairs and save tens of thousands of good-paying construction jobs," she said.

Prices Take a Dip

The gas tax holidays come as gas prices slowly tick down from a record high of $4.33 per gallon on March 11, primarily driven down by the lower global price of crude oil, AAA reported.

The national average now stands at $4.25 per gallon. That is seven cents less than a week ago, 72 cents more than a month ago and $1.37 more than a year ago.

According to AAA, gasoline demand is defying seasonal trends domestically and has dipped slightly, perhaps in response to higher prices at the pump.

"Usually this time of year, with warmer weather and longer days, we'd see an uptick in gasoline demand as more people hit the road," said Andrew Gross, AAA spokesperson. "But we had a slight drop in demand last week, which may be due to higher pump prices. In our new survey of drivers, 59 percent said they would change their driving habits or lifestyle if the cost of gas hit $4 per gallon. And if gas were to reach $5, which it has in the Western part of the country, three-quarters said they would need to adjust their lifestyle to offset the pump price."

According to new data from the Energy Information Administration, total domestic gasoline stocks fell by 3.6 million barrels to 241 million barrels last week. Gasoline demand also decreased slightly from 8.96 million barrels per day to 8.94 million barrels per day.

The drop in gas demand is contributing to price decreases, but the recent reversal in oil prices is creating downward pressure on pump prices. If the oil price continues to decline, pump prices will likely follow suit. However, should oil prices start to climb again, pump prices will likely follow, AAA reported.