STATE COLLEGE, Pa. (WTAJ) – After President Joe Biden proposed a gas tax cut on Wednesday, a Penn State supply chain professor said it may not make that much of an impact.
Professor Brent Moritz of the university’s Smeal College of Business said the federal cut of 18.4 cents per gallon could lower prices by that amount, but there’s no guarantee the drop could fall to consumers.
Instead, the gas companies could keep fuel costs the same and make more profit.
“My sense is this is really more of a political consideration rather than an economic one,” Moritz said. “I think the president wants to show himself responsive to the American consumer and to be showing that he’s doing something.”
Moritz added the proposed three-month holiday isn’t enough time to lower prices permanently. As inflation continues to rise, he thinks prices will go back up after the holiday is over.
He said the demand for gas is too high with summer in full swing, and supply is too low with a lack in American oil supply and the Russian invasion of Ukraine.
He said a state tax cut, however, could make a bigger difference in Pennsylvania.
The Keystone State currently has the highest state taxes in the country at nearly 58 cents per gallon.
Maryland suspended its 36-cent tax in March and April, and Moritz said the average gas price in the state went down 36 cents after four days.
Get daily updates on local news, weather and sports by signing up for the WTAJ Newsletter.
Governor Tom Wolf said last year he’s committing to phasing out the state’s gas tax, and several state lawmakers called for at least partial cuts last week.
And once Maryland reinstated the tax, it took two days for the price to go back up about 36 cents.
Moritz added some psychology and marketing go into a gas station’s decision for its price.
“For example, if a station is currently selling at $4.99, they might forgo some of their profits on gas rather than pricing above the psychologically important $5 level,” Moritz said. “A station selling at $4.99 might not immediately drop by 18 cents, but it would likely drop some.”