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Gas Tax Holiday Won't Solve $5/Gal US Gasoline Problem, Kpler Says

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A proposed 18.4-cent federal gasoline tax holiday would do little to offset rising US fuel prices as tightening global supplies push gasoline toward $5 per gallon, Kpler strategists said in a Tuesday note.

The firm said Congress has never approved a federal gasoline tax suspension despite similar political pushes during previous price spikes in 2000, 2008 and 2022.

Lawmakers revived the proposal in 2026 as tensions over Iran and the Strait of Hormuz pushed gasoline prices higher ahead of summer travel demand.

Kpler said Congress is reviewing bipartisan proposals from lawmakers including Senators Josh Hawley and Mark Kelly, with some plans seeking a 90-day gasoline tax suspension and others extending through summer or longer.

US President Donald Trump and Energy Secretary Chris Wright publicly support the proposal, although Congress must approve any federal gasoline tax suspension.

The note said consumers face a much larger affordability problem because gasoline prices have climbed toward $5 per gallon, rather than just an 18.4-cent tax burden.

Kpler said even a full tax pass-through would leave gasoline prices well above the five-year summer average of roughly $3.56 per gallon.

The note said that tightening global refined product balances and falling fuel inventories continue to pull US gasoline exports into overseas markets to offset international shortages.

The gasoline market remains structurally tight as global supply disruptions linked to the Strait of Hormuz continue to pressure refined product markets, according to Kpler.

Kpler added that suspending the gasoline tax for three months would reduce government revenue by about $10 billion, while a six-month pause could exceed $20 billion.

Kpler said most federal fuel tax revenue flows into the Highway Trust Fund, which is projected to become insolvent around 2028 without additional financial support.

The note said the gas tax debate reflects political pressure more than economic solutions, since global refined fuel shortages remain the primary driver of rising gasoline prices.

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