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Biden Proposed a Gas Tax Suspension. Here’s Why Oil Prices Are Falling.

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Crude prices fall as the Biden administration takes more steps to try to lower gasoline prices.

Mario Tama/Getty Images

Oil prices were falling Wednesday even after President Joe Biden called on Congress to temporarily suspend the federal tax on gasoline.

Biden is calling on lawmakers to lift the federal tax on gas for three months and is asking states to take similar measures. The federal government charges a tax of 18 cents per gallon on gasoline and 24 cents on diesel fuel.

A suspension of the gas tax, however, wouldn’t help solve the underlying problem with gasoline–that oil prices are too higher. If anything, it might let consumers drive more, increasing demand and doing nothing for supply. “It’s hard to see what Biden thinks he will gain by this announcement,” writes Capital Alpha Partners’ James Lucier. “The market is calling for demand destruction. Lowering the price when supplies are tight will only lead to demand creation. There is no guarantee that cost savings will be passed on to consumers; in fact, the dynamics of pricing power in a competitive commodity market suggest that it won’t be.”

Still, Brent crude prices, the international benchmark, fell 2.5% to $111.74 a barrel. West Texas Intermediate, the U.S. standard, dropped 3% to $106.19.

So what’s going on? Blame recession fears. Not only is oil down, but the

S&P 500

Dow Jones Industrial Average
are falling too, copper is sinking, while bond yields slip and the dollar rises. “This morning’s market action has recession worries written all over it,” writes Peter Boockvar, chief investment officer at Bleakley Advisory Group.

Crude prices have spiked this year after Russia invaded Ukraine in February, and the government, seeking ways to curb the fuel costs that are driving decades-high inflation, ever since.

It might just take a recession to do it.

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