Suspending the federal gas tax would cut prices by only 4%

The federal gas tax is 18.4 cents a gallon. Politicians reach for that number when pump prices climb, and it is the number that explains why the fix rarely works.

In mid-May 2026, gasoline averaged over $4.50 a gallon, according to AAA. President Donald Trump said he wanted Congress to suspend the federal gas tax, and a bill was introduced in the Senate. But suspending that tax would cut the national average price by only about 4%, even if oil companies passed on the entire savings. In high-cost states like California, the percentage drop would be smaller still.

Here is the part that matters for your wallet and your lungs. The price at the pump is set overwhelmingly by the global oil market and a stack of domestic costs, not by the tax line. And every gallon you buy and burn becomes air pollution that can drift back into your home. Understanding what you are actually paying for, and breathing, points to fixes that work far better than a tax holiday.

The four ingredients in a gallon of gas

A retail gallon of gasoline is the sum of four things: crude oil, refining, distribution and marketing, and taxes.

The U.S. Energy Information Administration broke down the mix in January 2026. Crude oil accounted for about 51% of the pump price. Refining made up roughly 20%. Distribution and marketing added about 11%. All taxes combined, federal and state, came to about 18%.

That mix shifts with conditions. When crude prices spike, oil can drive more than 60% of the price. When crude drops, taxes and logistics become a larger share. But the pattern holds. Crude oil is the largest single ingredient, and most of what you pay is set before the fuel reaches a station.

Why the tax cut mostly misses you

The gas tax is a small slice, and even that slice does not fully reach drivers.

Research from the Wharton Budget Model found that consumers get about 79% of the reduction from a gas tax holiday. Oil companies and fuel retailers keep the other one-fifth. So a suspension of the 18.4-cent federal tax does not put 18.4 cents back in your pocket. It puts closer to 14.5 cents there, and drops the national average price by roughly 4%.

There is a longer cost, too. Gas taxes fund roads and bridges. Suspending them pushes that upkeep onto future drivers and general taxpayers. Gas taxes are also meant to charge drivers for costs their driving imposes on everyone else: carbon emissions, local air pollution, congestion and crashes. Severin Borenstein is an energy economist at the University of California, Berkeley. He has found U.S. fuel taxes already sit far below the true cost of driving to society. Removing the tax shifts more of that cost onto everyone else.

Crude oil, the ingredient you cannot vote away

Because crude is the biggest piece, most of your pump price comes from the global oil market.

Usually, big swings in crude prices come from shifts in global demand and expectations rather than supply cuts. Economist Lutz Kilian showed as much in widely cited 2009 research. Early 2026 was an exception. The war in Iran created a classic supply shock. Shipping through the Strait of Hormuz was severely disrupted, and Middle East oil infrastructure came under attack. Millions of barrels a day came off the market, according to the International Energy Agency.

Drivers cannot quickly cut how much they drive when prices jump. So a rise in crude costs tends to mean people pay more rather than drive less. A tax holiday feels appealing for exactly that reason, and does so little for it. The holiday nibbles at the smallest ingredient while the largest one drives the price.

The California puzzle and a $59 billion mystery

California shows how much of the price sits outside any tax debate.

The U.S. does not have one gasoline market. Roughly a quarter of U.S. gasoline is a cleaner-burning blend called reformulated gasoline. Urban areas across 17 states and Washington, D.C. require it to reduce smog, according to the Environmental Protection Agency. California uses an even stricter formulation that few out-of-state refineries make, and no pipelines bring gasoline in from other refining regions.

California prices have long run above the national average, partly from higher state taxes and stricter rules. But a 2015 refinery fire in Torrance cut production capacity. Prices have run about 20 to 30 cents a gallon higher than those factors alone explain. Borenstein calls this the “mystery gasoline surcharge” and ties it to weak competition among refineries and stations. California’s own Division of Petroleum Market Oversight found the surcharge cost the state’s drivers about $59 billion from 2015 to 2024.

The Jones Act: pennies that add up

A century-old shipping law quietly raises prices on the East Coast.

The 1920 Jones Act requires cargo moving between U.S. ports to travel on vessels built, registered, owned, and largely crewed by Americans. Of the world’s roughly 7,500 oil tankers, only 54 meet that standard. Only 43 can carry refined fuels like gasoline, according to reporting cited by The Conversation. The result is that some Gulf Coast gasoline is exported overseas while the Northeast imports fuel, because moving it between U.S. ports costs so much.

Economists Ryan Kellogg and Rich Sweeney estimate the law raises East Coast gasoline prices by about $1.50 a gallon on average. That costs drivers roughly $770 million a year, they write in an NBER paper. The Trump administration temporarily suspended the Jones Act during the 2026 supply shock, a move usually reserved for hurricanes that knock out Gulf Coast refineries.

The exposure you cannot see at the pump

Here is the cost that never appears on the price sign. Every gallon burned becomes air pollution.

Vehicle exhaust is a major source of fine particulate matter, known as PM2.5, along with nitrogen dioxide and other combustion pollutants. PM2.5 particles are small enough to travel deep into the lungs and enter the bloodstream. The EPA sets the annual health standard for PM2.5 at 9 micrograms per cubic meter, lowered from 12 in 2024. The World Health Organization recommends a stricter annual guideline of 5 micrograms per cubic meter.

These pollutants do not stay outside. They drift into homes near busy roads, freeways, ports, and coastlines, where diesel trucks and ships concentrate emissions. From a building-biology standpoint, that is a source-control problem. The goal is keeping combustion pollutants out of the air you breathe indoors, where people spend most of their time.

Coastal areas carry a specific burden. Ports and shipping lanes concentrate diesel exhaust, and refineries, many built along the water, add their own emissions to the same air. The same fossil-fuel system that sets your pump price also sets the pollution load along the built edge where homes meet the coast.

Practical fixes that beat a tax holiday

You cannot control the global oil market. You can control your exposure and your fuel use.

Filter your indoor air near traffic. Do you live within a few hundred feet of a highway, port or busy road? Run a filter rated MERV 13 or higher in your HVAC system, or a portable HEPA unit. These capture PM2.5 that infiltrates from vehicle and ship exhaust.

Manage ventilation by timing. Combustion pollution peaks during rush hour and, near ports, when ships are in. Keep road-facing windows closed during those windows and ventilate when traffic is light.

Cut the fuel you burn. Borenstein notes the best protection against oil price shocks is a more fuel-efficient vehicle, or one that does not burn gasoline at all. Less fuel burned means lower fuel bills and less exhaust in your neighborhood’s air.

Support cleaner freight at the coast. Shore power for docked ships and electrified port equipment cut diesel emissions at the source, which is the most effective place to stop the pollution.

What actually lowers what you pay at the pump

A gas tax holiday is a partial, short-lived rebate on the smallest ingredient in your fuel. The federal tax is 18.4 cents a gallon, drivers keep only 79% of any cut, and the national price would fall about 4% at most. Meanwhile crude oil, at 51% of the price, keeps setting the number.

The more durable answer works on both fronts. Burning less fuel lowers what you pay and what you and your neighbors breathe. And treating vehicle and ship exhaust as an exposure pathway turns an invisible cost into a manageable one. You can filter it, time around it, and design for it. The economist’s answer to a high pump price and the building-biology answer to the pollution behind it point the same way: use less gasoline.