How a gas tax holiday could reduce shipping costs - ShipRx
Blog / Would Gas Tax Holiday Help Shipping Costs?
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Is a gas tax holiday a panacea to lower shipping costs?

Since the beginning of the war on Ukraine, the price of fuel worldwide has skyrocketed. In the U.S., Americans are feeling an increase of around $2 per gallon. In response, President Biden called on Congress to suspend the federal gas tax until September without impacting the Highway Trust fund. Currently, the 18.4-cent tax per gallon of gasoline and a 23.4-cent tax per gallon of diesel fund critical highways and public transportation.

A gas tax holiday would effectively lower the at-pump cost of fuel, leaving more money in Americans’ pockets over the summer. However, this action alone won’t return fuel prices to last year’s rates. Mixed with the daily release of barrels from the Strategic Petroleum Reserve, though, it will dampen the effect of rising prices.

In response to the rising fuel costs earlier this year, FedEx and UPS announced an increase in fuel surcharges. As the hopes of reduced rates linger in the air, shippers wonder whether a gas tax holiday will lower shipping costs. In this article, we’ll look at all the factors involved and show you how you can reduce your shipping costs this summer.

Here’s how a gas tax holiday could lower your shipping costs

The federal gasoline tax has remained unchanged since 1994. Suppose Congress approves the proposed federal gas tax holiday. In that case, Americans will see a 23.4 cent reduction per gallon of diesel and an 18.4 cent reduction per gallon of gasoline at the pump— at least until September.

What does that mean for fuel surcharges? UPS and FedEx each have their own indices for fuel surcharges, based on current diesel fuel costs and the corresponding surcharge percentage on other indices put out by the U.S. Energy Information Administration. The retail price posted in the US EIA diesel index includes all taxes.

Unless FedEx and UPS change their indices, the 23.4-cent reduction should result in a half-point (.5%) reduction in the fuel surcharge. A half-point isn’t much, but it’s better than nothing, making a gas tax holiday great news for shippers who only use ground shipping.

Will the gas tax holiday lower rates for everyone?

Lower fuel costs should mean lower rates across the board— right? Not always.

While the gas tax holiday will lower the rates for gasoline and diesel, air service fuel surcharges are based on kerosene-type jet fuel. The gas tax holiday won’t affect your rates if you’re shipping through air services.

So what happens if the hoped-for gas tax holiday doesn’t receive Congressional approval? Or, what if it gets approval but doesn’t lower your rates? There are other ways to cut your monthly spending on shipping. ShipRx has helped hundreds of shippers reduce shipping costs through parcel rate negotiations and audits. If you’re paying too much for shipping or missing out on the refunds you deserve, we’re here to help.


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