Gas Tax Suspension and IEA Stock Release: Oil Policy Push

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Trump is weighing a federal gas tax suspension while the IEA board meets on releasing oil and diesel stocks, as Brent holds near $100 and diesel sets records.

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President Donald Trump said on Tuesday that his administration is considering suspending the federal gas tax, as it looks to ease fuel costs ahead of November's midterm elections. "Well, we're thinking about that," he said when asked. On Wednesday, the governing board of the International Energy Agency held an informal meeting at 1300 local time (1100 GMT) to discuss releasing oil and diesel stocks. Brent crude traded at about $100.87 a barrel, and US diesel sat at record levels.

What Is the Federal Gas Tax Proposal?

The proposal would suspend the 18.4 cents a gallon federal tax on gasoline, which has been unchanged since 1993, and possibly the 24.4 cents levied on diesel. Research estimates a suspension would cut pump prices by 10 to 16 cents a gallon. The national average gasoline price was $4.37 a gallon on Tuesday.

Congress must approve any suspension. Both chambers have left Washington for the campaign trail, which makes passage before the midterms unlikely. Trump offered no further details.

The tax funds highway, bridge and transit programs. A suspension would cost the government billions of dollars a month in revenue and open a gap in infrastructure funding. Trucking groups, including the American Trucking Associations, opposed the idea when it surfaced in May.

On Oct. 5, Trump signed an order easing limits on a tax-exempt variety of diesel, a narrower step aimed at the same cost pressure.

Why Is the IEA Meeting on Oil and Diesel Stocks?

The IEA board met because the G7 agreed last week to a 100 million-barrel release of crude and diesel, to be coordinated through the agency. The release is to begin immediately and run over four months, with a substantial diesel volume front-loaded in the first 20 days.

The G7 decision followed pressure from Washington. Trump had warned some European countries that the United States would ban diesel exports if they did not release more diesel, and he dropped that plan once European leaders agreed. The United States supplies roughly half of Europe's diesel imports.

It remains unclear whether the volumes are the remainder of the 400 million-barrel IEA release committed in March or an addition to it. About 325 million barrels of that earlier commitment have been delivered, leaving roughly 75 million barrels outstanding.

How Did Markets Respond?

The market response was muted. The G7 announcement is largely an acceleration of volumes the market has known about since March, so little of it counts as new supply. Brent for November delivery traded near $100.15 on Tuesday and rose 0.29% to $100.87 on Wednesday. WTI traded around $89.53 a barrel.

The crude oil price is only part of the problem. Refined products have recovered more slowly than crude. US distillate inventories are 14% below the five-year average. European diesel prices are up about 125% year to date.

What Is Driving the Fuel Crunch?

The strain traces to the conflict involving Iran and disruption around the Strait of Hormuz, through which a large share of the world's seaborne oil passes. Crude flows out of the strait have since risen above pre-war levels. Iran has nonetheless stepped up attacks on tankers in recent days, and Houthi strikes on Saudi Arabia have revived supply fears.

Diesel is the pressure point. It underpins trucking, agriculture and industry, so its price feeds directly into freight costs and food prices. US diesel hit an all-time high above $5.85 a gallon in September and has since climbed to $6.3151.

What Comes Next for Fuel Prices and Policy?

A gas tax suspension would act only on the final price at the pump. It would not add barrels to the market, so it is a demand-side and political lever, while the IEA release is a supply lever. Neither addresses the shipping risk in the Gulf.

The near-term variables are the pace of the diesel release over its first 20 days, whether the G7 volumes add to the March commitment, and whether Congress returns to act on the tax before the midterms. Tanker security in the Strait of Hormuz remains the main swing factor for Brent.

Outlook

Washington is pursuing fuel relief on two tracks: a tax measure that depends on a Congress now out of session, and a coordinated stock release that is largely priced in. With Brent near $100 and diesel above $6.30 a gallon, the diesel release schedule and Gulf shipping conditions will set the direction of prices into the November vote.