States are taking matters into their own hands to fight high gas and diesel prices

By Matt Egan, Tami Luhby, Nina Giraldo, CNN

(CNN) — As the Trump administration deliberates how to fight historically high gas and diesel prices, a growing number of US states are taking matters into their own hands.

The state-level action has taken place across the country in recent days and weeks, spanning red states like Texas and Oklahoma, blue states including California and purple states such as Georgia.

State officials say they hope to provide temporary relief ahead of the midterms to drivers, farmers and truckers frustrated by sky-high fuel prices, which are driven in large part by the Iran war.

Ohio, a major battleground in the elections next month, became the latest to take action on Thursday. Gov. Mike DeWine, a Republican, signed a bill into law suspending the state’s gasoline and diesel taxes for 90 days beginning Sunday. Both gubernatorial candidates – Republican Vivek Ramaswamy and Democrat Amy Acton – pushed for the tax break.

The state actions underscore the pressure on local officials from voters who want lower energy prices.

Gas prices are above $4.40 a gallon nationally, and they have never been this high at this time of year — not even in 2022 after Russia invaded Ukraine. Prices for diesel, the workhorse fuel that powers trucks, tractors, trains and construction vehicles, hit all-time highs last month but has since backed away a bit.

Analysts say the states’ moves could help American consumers and businesses on the margin, but none of the actions will drastically change the reality of high prices. The main problem is that the Iran war, the Russia-Ukraine conflict and export restrictions in China have spurred a global shortage of refining.

“States are taking actions where they have control, but they can’t control the events in the Middle East and Russia – and those events are much bigger drivers of prices than temporary relief steps states can offer,” said Andy Lipow, president of consulting firm Lipow Oil Associates. “If you want to lower prices, end the Iran conflict.”

Oil exports out of the Middle East have raced back to life in recent weeks, thanks in part to US military escorts. And President Donald Trump has repeatedly said that the war will end soon and that gas prices will plummet shortly after.

But elected officials, particularly Republicans, are growing increasingly antsy to demonstrate they are doing something as the midterm elections near.

States suspending gas taxes

Ohio’s bill will temporarily suspend its gas and diesel fuel taxes of 38.5 cents a gallon and 47 cents a gallon, respectively. The measure is estimated to save drivers a total of $725 million over the next three months.

Other states have also taken various actions to give drivers some tax relief.

Indiana Gov. Mike Braun, a Republican, renewed a pause on Wednesday for another month to give “Hoosier families additional breathing room to make ends meet while protecting funding for state and local infrastructure projects,” according to a statement from the governor’s office. Braun first suspended gasoline taxes in the spring.

And in Georgia, Republican Gov. Brian Kemp declared a state of emergency Monday, suspending the taxes on gas and diesel fuel for a month. Kemp also signed legislation in the spring temporarily pausing the levies, which resumed in early June.

Kentucky and Illinois, which both have Democratic governors, also took measures earlier this year to temporarily lighten gas levies. Kentucky Gov. Andy Beshear temporarily reduced gas taxes by 10 cents in the spring and blocked a small increase in the tax that would have kicked in on July 1. And in June, Illinois Gov. JB Pritzker delayed a scheduled 1.3-cent increase in the gas tax for six months.

A few congressional lawmakers from both parties have also floated suspending the federal gas tax of 18.4 cents, though their efforts did not go far on Capitol Hill.

Although suspending state gas taxes is a good talking point for politicians, fuel and policy analysts say they are not that effective.

Drivers typically receive only between 60% and 80% of the savings from gas tax holidays, with the rest captured by gas stations and other players in the supply chain, said Alex Arnon, director of policy analysis at Penn Wharton Budget Model, an initiative that has studied the impact of gas tax suspensions.

In the current highly uncertain environment, Arnon expects savings will be on the lower end for drivers.

“Everybody along the supply chain has both an incentive and more opportunity to siphon off a little bit of the savings from that gas tax holiday,” he said.

Also, reducing gas taxes only spurs demand without increasing supply, which can end up raising prices, said Patrick De Haan, head of petroleum analysis at GasBuddy.

“The market is telling you it’s in distress, something’s wrong,” he told CNN. “The way to respond to that shouldn’t be, ‘Oh, hey, let’s cut the price so Americans don’t have to make tough decisions.’”

Help for truckers

To help truckers cope with the diesel spike, Texas, Alabama, Oklahoma, Nebraska and other states have taken steps to boost red-dyed diesel. Red-dyed diesel is the same as regular diesel. It’s just untaxed and dyed to classify it for off-road use only, such as farming.

By allowing red-dyed diesel to be used on highways, state officials can save truckers some money. But the savings are relatively modest.

“It’s all the same diesel,” Lipow said. “They’re hoping to save truckers and farmers some money that can ultimately be passed through to consumers.”

Another frequent step state officials take to help lower fuel costs is allowing refineries to switch to cheaper winter-blend fuel earlier than usual.

California and Michigan have both taken this measure in recent months. Most states east of the Rocky Mountains have already switched over to the cheaper winter fuel.

The move can help save drivers in California about 25 cents a gallon, Lipow said, though he noted the famously expensive state is grappling with refinery outages that could offset the savings.

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