Target (TGT) CEO Brian Cornell isn’t convinced that a potential federal gas tax holiday, an idea floated by President Biden on Monday, is a real solution to the elevated gas prices facing drivers across America.
“We have a classic supply and demand challenge,” Cornell said at an event held by The Economic Club of New York. “And in all due respect to a gas holiday, it’s only going to fuel the demand. It’s doing nothing to increase supply. So that’s a temporary, almost a mini stimulus, but it’s time to fundamentally change the supply and demand curves for fuel and transportation.”
The proposal, which would require congressional approval, could save consumers as much as 18.4 cents per gallon. The national average for a gallon of gas currently hovers just below $5 per gallon, according to AAA.
US President Joe Biden speaks with reporters as he walks on the beach in Rehoboth Beach, Delaware, June 20, 2022. (Photo by SAUL LOEB / AFP)
Stewart Glickman, energy equity analyst at CFRA Research, recently echoed that sentiment.
“If we’re going to get U.S. gasoline prices to fall, it’s probably not going to be a supply-driven solution,” Glickman told Yahoo Finance. “The solution here, unfortunately, is probably a recession that kills demand and reduces scarcity of supply.”
‘Classic supply and demand situation’
In terms of supply, experts consistently cite America’s relative lack of refining capacity as a key factor in holding back the country’s ability to provide more supply.
“I think about applying longer term solutions and figure out how we … get out in the oil fields and figure out what needs to change,” Cornell added. “How do you incentivize more production? You have a classic supply and demand situation here that is out of whack right now. And increasing demand is not going to help lower those prices over the long term.”
Gas prices in the U.S. (AAA)