Some economists worry 'gas tax holiday' could backfire

ByDerrick Lewis KTRK logo
Thursday, June 23, 2022
High gas prices could hurt drivers and oil companies, experts say
A drop in prices would not only be beneficial for drivers, but oil and gas companies as well.

HOUSTON, Texas (KTRK) -- Drivers are hoping for relief at the pumps as gas prices continue to climb.

A drop in prices would not only be beneficial for drivers, but oil and gas companies as well.

People tend to change their habits to save money when prices are high. And people across town are just trying to get by.

"People (are) struggling already and gas is already this high. That doesn't make any sense," said driver Kenneth Dixon, who also offered some suggestions. "They need to pay people more money. People (are) going to work every day and struggling already."

President Joe Biden wants to get rid of the federal gas tax for three months to give drivers some relief. But experts say that's only a temporary fix.

"If we start giving away gasoline, or subsidizing its purchase, it's just going to make the problem worse and it's going to backfire and prices are actually going to wind up higher than they actually were before," said Clay Seigle, the vice president of U.S. Associations for Energy Economics.

Seigle believes oil and gas companies will benefit as prices go down and demand goes up. But, he says, it would have to stay that way.

"They want to see stability," he said." They want to see consumers be able to afford gasoline, not only the required stuff, to get people to work and to school, but also fun things. Like, this is the summer season, people take road trips."

According to AAA, the average price of regular gas in Texas is $4.62. One year ago, it was $2.73.

"I think it's going to keep going up to be honest," driver Angela Huereca said.

She has made changes.

"I've definitely been driving less," she said. "If my friend offers to drive, we just all kind of go in her car and we just split gas in between all of us to be more cost efficient."

Right now, the high cost of gas is causing people to save, driving down demand, and ultimately creating less of a profit for oil and gas companies.