A group of Republican officeholders — and one trucking company owner — stood outside the Owens Market Deli and Truck Plaza in Bedford County on Tuesday and called on the governor to hold a special session to waive the state gas tax for 90 days.
This will not happen, but this is still likely a good political move for Republicans. Whether it’s good policy, that’s a matter of opinion, but it is a policy that some states — mostly, but not exclusively, Republican-run ones — have pursued as gas prices have skyrocketed in the aftermath of U.S. military action against Iran.
Before we get into the context portion of today’s program, let’s recap the action. Five Republican state legislators (House Minority Leader Terry Kilgore of Scott County, Del. Scott Wyatt of Hanover County, Del. Wendell Walker of Lynchburg, Del. Madison Whittle of Danville, state Sen. Mark Peake of Lynchburg), one Republican congressman (John McGuire of Goochland County) and a Bedford trucking company owner (Curtis Snead) made the case for a sales tax holiday on the gas tax.
The state can afford to pass up the revenue, they said, because revenues are flush. “The dollars are there,” Wyatt said. “The governor campaigned on affordability.” This, the Republicans said, would make things more affordable.
“Guys, this is a no brainer,” Walker said.
Democrats see it differently. Asked about the Republican event, the office of Gov. Abigail Spanberger issued this statement: “With President Trump’s war driving up prices at the gas pump, the grocery store and across the board, Governor Spanberger is focused on providing relief for families. The governor is assessing all possible options to address the extra costs created by President Trump’s war and she is working to create long-term solutions to make the commonwealth more affordable — so families can keep more of what they earn.”
That’s a long way of saying “let’s blame this on Trump and move on.”
Now, onto the context, where politics and policy intertwine.
Multiple states have already declared a gas tax holiday and others are considering it
The Associated Press says “about one-third” of U.S. states have enacted some kind of tax holiday, although some of those have already expired. Seven have taken action on gasoline taxes, nine others have focused specifically on diesel.
Georgia was the first to do so, in March. Gov. Brian Kemp extended that into June and last week revived the tax break for another 30 days. North Carolina legislators have called themselves back into session Wednesday to push a gas tax holiday for that state.
Most — but not all — of the gas tax holiday states are run by Republicans
Two exceptions are Kentucky and Illinois, both of whom have Democratic governors (Andy Beshear and JB Pritzker). It must also be noted that both of those governors also are said to have presidential ambitions.
Ohio, another Republican-run state, has enacted a gas tax holiday, but it was the Democratic candidate for governor, Amy Acton, who was the first to call for one. Fox News reports that “Republican legislative leaders scrambled to recall lawmakers to the Statehouse” after Acton called for a gas tax holiday and the Republican candidate, Vivek Ramaswamy, followed suit a few hours later.
That brings us to the politics.
Gas prices are high but are falling
GasBuddy reports that gas prices hit their height in April and May, then fell until July 4, when they started rising again. They topped out in September, but lower than they were in the spring, and are now dropping. So why call for a gas tax holiday now and not earlier? Democrats see election politics at play. “I wish it didn’t take the election season to get this attention,” North Carolina Gov. Roy Cooper, a Democrat, recently said. Speaking of politics …
The backdrop to this event is an unexpectedly close congressional race
Parties usually make these kinds of calls at the State Capitol. This one was in Forest, just west of Lynchburg. Notably, one of the main speakers was McGuire, who finds himself in a hotly contested congressional race that forecasters have now moved into the “toss-up” category. Although the 5th District has been a solidly Republican district — McGuire won two years ago with 57.3% of the vote — a recent Washington Post poll put McGuire only 5 percentage points ahead of Democratic challenger Tom Perriello.
Whatever the policy merits of this proposal may be, the event felt very much like a campaign event intended to boost McGuire. While the Republican officeholders spoke, a group of people stood behind them with McGuire signs that noted he’s been endorsed by President Donald Trump. That brings us to a risk-reward assessment.
Voters are concerned about prices and souring on Trump
This is where things get tricky for Republicans. That Post poll showed that 49% of the likely voters surveyed in the 5th District listed the “cost of living” as their top concern. Nothing else came close. The second most popular option, at 15%, was “something else,” which outranked all the other issues listed.
Whether you’re a Democrat or a Republican, that seems a clear mandate that voters want to hear their concerns about the economy addressed. Here’s the risk for Republicans in talking about gas prices. The price shot up after military action commenced against Iran. Is it possible for Republicans to call for lowering gas prices without talking about why they’re gone up? Kilgore tried. “That’s a federal issue,” he said, but this is what the state can do.
Nonetheless, that Post poll found that even in the 5th District, most voters disapprove of Trump’s handling of the presidency: 53% disapprove, 47% approve.
Furthermore, 39% said they are worse off financially since Trump returned to the presidency, 25% say they are better off, 35% say they’re about the same.
McGuire’s decision to be seen standing there in front of signs that mentioned Trump is an interesting one, given how poorly Trump performs in that poll. It could also be a calculated decision that he needs to pump up Republican enthusiasm.
McGuire says we need more oil refineries, but misstated a lot of their history
Here’s what McGuire said: “I want to tell you how we got here. We got here because there was a big push for electric cars. The U.S. used to have 250 refineries; now we have 130. … We’re trying to push everybody to have electric cars.”
This is a jumble of facts that are out of order and leave listeners with the wrong impression.
It is true that the U.S. has fewer oil refineries than we once did. The number of American oil refineries peaked in 1982 at 254, according to Statista. Today we have 130, according to the U.S. Energy Information Administration. However, their decline has nothing to do with electric cars. The sharpest decline in U.S. refineries came in the 1980s (when we had 12 straight years of Republican presidents) and the 1990s, long before the current push for electric vehicles. The refineries that closed were small ones that were no longer profitable — basic business economics.
Despite that, U.S. refining capacity hasn’t really changed, according to the U.S. Energy Information Administration, because existing refineries were expanded to make up for the loss of those smaller ones.
McGuire went on to point out — correctly — that the U.S. exports a lot of oil to be refined elsewhere. That’s because the U.S. tends to produce “light” crude while our refineries are built to refine “heavy” crude (which often comes from Canada). McGuire said he recently asked Secretary of the Interior Doug Burgum why the U.S. doesn’t build more refineries. Burgum said it would take five years to build a refinery due to environmental regulations. McGuire wants to see those environmental regulations changed and the permitting time cut to five days.. “I bet it doesn’t take China five years to open a refinery,” he said. “Let’s get some refineries open.”
He’s right on part of this: China, as a communist country, doesn’t have to worry about pesky neighborhood groups with zoning complaints. However, construction still takes time. The Economic Times has reported on refinery projects in China that take three years to build.
The bigger challenge to building more American refineries might be old-fashioned capitalism. The first new oil refinery in 50 years is now underway in Texas — funded by an Indian company that intends to export the product to its country, not sell it in the United States. When the project started earlier this year, KVUE-TV in Austin quoted Ed Hirs, an energy fellow at the University of Houston, as saying refineries have been difficult to build because American investors haven’t been interested in such facilities. “They make pennies on the gallon. They don’t make a lot of money. The oil and gas sector has been the poorest performer in the S&P 500 for more than a dozen years, notwithstanding the last eight weeks. That’s not enough to convince Wall Street to advance capital in this direction, especially when domestically, our consumption of transportation fuels has been tailing off because we buy more efficient vehicles and there is a trend towards EVs.”
To that extent, it’s market forces that are preventing the U.S from expanding refining capacity. Blaming a push for electric vehicles also seems to be blaming the wrong thing. There are certainly those who would like to see more electric vehicles on the road, but most American car buyers don’t seem to be among them. Last year, electric vehicle sales — as a percentage of total vehicle sales — declined from 8.0% to 7.4%, according to S&P Global Mobility. In any case, they’re not to blame for the current gas prices.
If we think that more refining capacity is an important national goal, then we need to figure out how to assure Wall Street that its investment will pay off. There is a political component to that: While the current administration might embrace fossil fuels, future ones may not, which probably spooks some investors. Years ago, the president of Appalachian Power at the time said that’s why his company was no longer building coal plants — utilities work on 40-year time horizons and nobody believed there’d be consistent political support for coal over four decades. The same thing likely applies to oil. Policies that swing back and forth across the political spectrum likely send investors to things that are safer over the long run.
Kilgore is right that there will be pressure on border communities
Kilgore pointed out that both North Carolina and Tennessee are considering gas tax holidays. “It’s going to push my constituents across the line to buy gas,” he said. It’s hard to dispute that, but the fate of gas-selling convenience stores along Virginia’s southern border probably isn’t a high priority except to those who represent those communities.
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