Suspending federal gas tax wouldn’t save drivers as much as they might hope – here’s what goes into the price of a gallon of gas |
With gasoline prices still high – averaging over US$4.50 a gallon in mid-May 2026 – President Donald Trump said he wanted Congress to suspend the federal gas tax, which is 18.4 cents a gallon for gasoline and 24.3 cents a gallon for diesel. A bill has been introduced in the Senate, and one is expected to follow in the House, according to Politico, but their fate is unclear.
States also charge their own taxes, ranging from 70.9 cents a gallon for gas in California to 8.95 cents in Alaska. Indiana, Georgia and Utah have suspended their gas taxes for at least some of 2026, and other states are considering similar measures.
As an energy economist, I have seen how suspending those taxes does reduce prices, but not as much as politicians – or drivers – might hope. Research on past gas tax holidays has found that consumers get about 79% of the reduction in gas taxes. That means oil companies and fuel retailers keep about one-fifth of the tax cut for themselves rather than passing that savings to the public.
Suspending the federal gas tax, which would require Congress to pass a law, wouldn’t help consumers much anyway. Even if oil companies passed on the whole savings to consumers, national average gas and diesel prices would drop only about 4%. The percentage reduction in high-cost states such as California would be even smaller.
Gas taxes are just one part of what drives gas prices. Overall, the price of a retail gallon of gas is the sum of four things: the cost of crude oil, refining, distribution and marketing, and taxes.
In nationwide figures from January 2026, crude oil accounted for about 51% of the pump price, refining roughly 20%, distribution and marketing about 11% and taxes about 18%. That mix shifts with conditions: When crude oil prices spike, that can drive more than 60% of the price; when the price drops, taxes and logistics are larger shares of the cost.
Crude oil is the biggest ingredient
Because the price of........