Rounds calls for fuel-tax holiday

RAPID CITY—With gasoline and diesel prices once again punishing consumers, farmers and truckers, U.S. Sen. Mike Rounds (R-S.D.) is asking President Donald Trump and state governments to provide immediate relief at the pump.

In a letter to Trump, Rounds called for suspending the federal gasoline and diesel taxes through the end of the year. He also urged Trump to use the Defense Production Act to help expand domestic oil-refining capacity.

“The prices at the pump are being driven by a global shortage of refining capacity,” Rounds wrote. “Americans feel the impact of this refining bottleneck every time they fill up at the pump, but farmers can’t stop their tractors and combines in the middle of harvest, and truckers can’t quit running their routes.”

The federal government currently collects 18.4 cents on every gallon of gasoline and 24.4 cents on diesel. State taxes average 33.3 cents on gasoline and 35.5 cents on diesel. Suspending both federal and state taxes would theoretically save motorists an average of 52 cents per gallon of gasoline and 60 cents per gallon of diesel.

Such savings would be particularly important in South Dakota and Indian Country, where people routinely drive long distances for work, health care, groceries and basic services. Diesel prices also affect far more than the people operating trucks and farm equipment. Higher transportation costs eventually appear in the price of almost everything delivered to a store.

“Those savings would make a huge difference for the American people,” Rounds wrote.

The senator proposed replacing the money temporarily lost to the Highway Trust Fund with a one-time transfer from the federal government’s General Fund. The trust fund pays for highway construction, maintenance and public transportation, making some form of replacement necessary if Congress suspends the tax.

Congress would have to approve the federal tax holiday, while each state would decide whether to reduce or suspend its own tax. There is also no guarantee that every penny of the tax reduction would reach consumers, although intense competition among gas stations would place pressure on retailers to pass along most of the savings.

Rounds maintains that the larger problem is not simply a shortage of crude oil. It is a shortage of facilities capable of turning crude into gasoline, diesel and jet fuel.

The Energy Information Administration reported that disruptions in the Middle East drove American refineries to unusually high production levels during the second quarter of 2026. Refinery margins rose sharply, while American exports of diesel and jet fuel reached record levels.

“Oil is flowing through the Strait of Hormuz,” Rounds wrote. “The prices at the pump are being driven by a global shortage of refining capacity—a weakness in the global fuel supply chain that we should start addressing here at home.”

Trump issued a presidential determination in April declaring domestic petroleum production, refining and transportation capacity essential to national defense. That determination authorized federal purchases, financial support and other measures under the Defense Production Act. Rounds is asking the administration to put that authority to work expanding existing refineries and encouraging new investment.

Rounds acknowledged that more refining capacity will not lower prices overnight. Refinery projects are enormously expensive, require lengthy permitting and can take years to complete. Companies are also reluctant to invest billions when future administrations could impose policies making those facilities uneconomical.

“We won’t see the results overnight,” Rounds wrote, “but the sooner we start, the better.”

The tax suspension and refinery expansion address two different problems. One offers consumers immediate relief. The other attempts to correct a weakness in the nation’s energy system that has been developing for decades.

(James Giago Davies is an enrolled member of OST. Contact him at skindiesel@msn.com)

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