Gas prices: Why are they so high, and will a gas tax holiday help?

President Joe Biden and lawmakers are feeling political pressure over soaring gas prices as inflation hits levels not seen since 1981.

Yet policymakers have few levers to pull to control gas prices, especially in the short term, because international market forces account for most of the prices you see at the pump.

The average price for a gallon of regular gas was $4.73 in the Twin Cities on Thursday, down a few cents from the peak earlier this month, yet far above the $2.87 average from one year ago, according to AAA data. At the current price, a driver with a 14-gallon tank is paying $66 to fill up.

Why am I paying so much?

The main driver of gas prices is the cost of crude oil, which has surged this year because of geopolitical and economic factors, including an increase in travel and the war in Ukraine.

Crude oil prices account for 59% of the cost of gas, according to the U.S. Energy Information Administration.

The next biggest driver is the cost of refining oil into gasoline, which makes up 26% of the price. Distribution and marketing costs account for 5%, and state and federal taxes make up the final 11%.

Politicians don't have much control over anything except the last factor, taxes.

Would a gas tax holiday help?

Not much -- and maybe not at all.

Biden is calling on Congress to suspend the federal 18.4-cent per gallon gas tax for three months to bring prices down. A driver with a 14-gallon tank would save about $2.57 per trip to the gas station, or $23 over the three-month holiday.

Minnesota has a 28.6-cent per gallon gas tax, which would take legislative action to suspend. The Minnesota Legislature is not in session, and a gas tax holiday hasn't garnered much support from current elected officials -- though Republican governor candidate Dr. Scott Jensen has endorsed such a move.

If both the federal and state taxes were suspended, it would save the average driver about $6.57 per trip to the gas station, or $59 over three months.

Why hasn't a gas tax holiday happened?

A few states have enacted one, but the U.S. has not.

The potential savings from a tax holiday are not guaranteed. Over the past 24 hours, economists have noted that there's nothing stopping oil companies and gas retailers from raising base prices and keeping the additional profit.

And if prices did decline, it could stimulate demand for travel. Without increasing the supply of gas, that could result in higher prices.

There are also budgetary concerns. Both the state and federal taxes contribute to road and bridge construction, and lawmakers would have to make up the shortfall to keep those projects on schedule.