With gasoline prices still high – averaging over US$4.50 a gallon in mid-May 2026 – President Donald Trump said he wanted Congress to suspend the federal gas tax, which is 18.4 cents a gallon for gasoline and 24.3 cents a gallon for diesel. A bill has been introduced in the Senate, and one is expected to follow in the House, according to Politico, but their fate is unclear.

States also charge their own taxes, ranging from 70.9 cents a gallon for gas in California to 8.95 cents in Alaska. Indiana, Georgia and Utah have suspended their gas taxes for at least some of 2026, and other states are considering similar measures.

As an energy economist, I have seen how suspending those taxes does reduce prices, but not as much as politicians – or drivers – might hope. Research on past gas tax holidays has found that consumers get about 79% of the reduction in gas taxes. That means oil companies and fuel retailers keep about one-fifth of the tax cut for themselves rather than passing that savings to the public.

Suspending the federal gas tax, which would require Congress to pass a law, wouldn’t help consumers much anyway. Even if oil companies passed on the whole savings to consumers, national average gas and diesel prices would drop only about 4%. The percentage reduction in high-cost states such as California would be even smaller.

Gas taxes are just one part of what drives gas prices. Overall, the price of a retail gallon of gas is the sum of four things: the cost of crude oil, refining, distribution and marketing, and taxes.

In nationwide figures from January 2026, crude oil accounted for about 51% of the pump price, refining roughly 20%, distribution and marketing about 11% and taxes about 18%. That mix shifts with conditions: When crude oil prices spike, that can drive more than 60% of the price; when the price drops, taxes and logistics are larger shares of the cost.

Crude oil is the biggest ingredient

Because the price of crude oil is the largest element, most of the price at the pump is derived from the global oil market.

Usually, big swings in crude prices come mainly from shifts in global demand and expectations – not from supply disruptions, according to widely cited research in 2009 by the economist Lutz Kilian.

But what is happening in early 2026 with the war in Iran is one of the exceptions: a classic supply shock. Severe disruptions to shipping through the Strait of Hormuz and attacks on Middle East oil infrastructure have taken millions of barrels a day off the global market.

Most drivers generally can’t quickly reduce how much they drive or how much gas they use when prices rise, so gasoline demand doesn’t change much in the short run. That means a jump in crude costs tends to result in people paying more rather than driving less.

Refining, regulations and the California puzzle

Refining turns crude into gasoline at industrial scale. The U.S. doesn’t have a single gasoline market, though. Roughly a quarter of U.S. gasoline is a cleaner-burning blend of petroleum-derived chemicals called “reformulated gasoline,” which is required in urban areas across 17 states and the District of Columbia to reduce smog.

California uses an even stricter formulation that few out-of-state refineries make. California is also geographically isolated: No pipelines bring gasoline in from other U.S. refining regions.

California’s gasoline prices have long run above the national average, explained in part by higher state taxes and stricter environmental rules. But since a refinery fire in Torrance, California, in 2015 reduced production capacity, the state’s prices have been about 20 to 30 cents a gallon higher than what those factors would indicate.

Energy economist and University of California, Berkeley, professor Severin Borenstein has called this the “mystery gasoline surcharge” and attributes it to the fact that there isn’t as much competition between refineries or gas stations in California as in other states. California’s own Division of Petroleum Market Oversight says the surcharge cost the state’s drivers about $59 billion from 2015 to 2024. It’s not exactly clear who is getting that money, but it could be gas stations themselves or refineries, through complex contracts with gas stations.

Getting the gas into your car

The distribution and marketing category covers the costs of everything involved in getting the gasoline from the refinery gate to your tank.

Gasoline moves by pipeline, ship, rail and truck to wholesale terminals, and then by local delivery truck to service stations.

At the retailer’s end, the key factors are station rent and labor, the cost to buy gasoline in bulk to be able to sell it, credit card fees of as much as 6 to 10 cents a gallon at current prices, and franchise fees paid to the national brand, such as Sunoco or ExxonMobil, for permission to put their branding on the gas station.

Most gas station operators net only a few cents per gallon on fuel itself – which is why many gas stations are really convenience stores with pumps out front. Borenstein and some of his collaborators have also documented that retail gas prices rise quickly when wholesale costs climb but fall slowly when wholesale costs drop.

The question of gas tax holidays

Gas tax holidays reduce funding for what the taxes are designed to pay for, typically roads and bridges. That pushes road and bridge upkeep costs onto future drivers and general taxpayers.

There is an additional problem, too: Taxes on gasoline are supposed to charge drivers for some of the costs their driving imposes on everyone else – carbon emissions, local air pollution, congestion and crashes. But Borenstein has found that U.S. fuel tax levels are already far below the true cost to society. Removing the tax on drivers effectively raises the costs for everyone else.

The Jones Act: A small number that adds up

The 1920 Jones Act is a federal law that requires cargo moving between U.S. ports to travel on vessels built and registered in the U.S., owned by U.S. citizens, and crewed primarily by U.S. citizens and permanent residents. Of the world’s 7,500 oil tankers, only 54 meet this requirement. Only 43 of these can transport refined fuels such as gasoline.

So, despite significant refining capacity on the Gulf Coast, some U.S. gasoline is exported overseas even as the Northeast imports fuel, in part reflecting the relatively high cost of moving fuel between U.S. ports.

Economists Ryan Kellogg and Rich Sweeney estimate that the law raises East Coast gasoline prices by about a penny and a half per gallon on average, costing drivers roughly $770 million a year. In light of the war’s effect on gas prices, the Trump administration has temporarily suspended the Jones Act requirements – an action more commonly taken when hurricanes knock out Gulf Coast refineries and pipeline networks.

What moves the number

The result of all these factors is that the price that drivers see at the pump mostly reflects the global price of crude, plus a stack of domestic costs, only some of which are inefficient.

Tax holidays give a partial, short-lived rebate. Jones Act waivers trim pennies, though permanent repeal may cause more fundamental changes, such as reduced rail and truck transport of all goods, which could lower costs, emissions and infrastructure damage associated with cargo transportation. Harmonizing fuel blends across states and seasons may lower prices somewhat, but likely at the expense of increased emissions.

Ultimately, the best protection against oil price shocks is a more efficient gas-burning vehicle, or one that doesn’t burn gasoline at all. In the meantime, the best I can offer as an economist is clarity about what that $4.50 actually buys.

This article includes material previously published on May 1, 2026.

Robert I. Harris does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

When was the last time you paid attention to your commute? And I don’t mean a couple of feet in front of you, at the car merging into your lane without a blinker. I mean really paid attention to the route you take.

Did you see the landmarks in the distance that make up the city skyline? Did you drive right past the grocery store you promised to stop by at the corner of this Peachtree Street or that Peachtree Street, a struggle Atlanta locals know well?

“Oops! Force of habit,” you might say to yourself as you miss your turn and begin to think about when and where you can turn around.

Relying on familiarity can either facilitate or impede daily navigation. As a researcher studying memory and navigation, I aim to understand how the brain supports spatial navigation and what happens if the cognitive mechanisms for choosing the best route home begin to decline, such as during stress or with aging.

Humans are creatures of habit – at least that’s what people tell themselves when wary of trying something new. But what if a new route is faster or safer than the one you usually take? Would you try it?

Research from my team suggests that people balance between exploration and habit – that is, trying something new or sticking with the familiar – when deciding what route to take. Which navigation strategy someone chooses depends not only on their spatial abilities but on their network of brain regions that support navigation.

A spatial blueprint

Spatial navigation refers to the cognitive ability that helps you travel from one location to another. It may sound simple, but it requires using cognitive functions such as memory, attention, decision-making and assessing potential rewards – never mind the ability to simply perceive the environment itself.

Spatial navigation uses memories of things you consciously experienced. Two types of memory relevant to navigation are what scientists call episodic and semantic.

For example, you might retrieve an episodic memory about a specific event: remembering a detour you took a week ago to drop a package off at the post office, including the traffic and weather that day.

You might also retrieve a semantic memory that’s more factual and knowledge-based: remembering how many blocks away the post office is from the park and the turns you need to make to get there.

Together, these kinds of memory inform your spatial memory, which allows you to retrieve location information. This could be where buildings are in relation to each other or where objects are situated in your house. Spatial memories help form your cognitive map, which is essential for getting around in the world.

Often, these different ways of remembering interact, and you can use one type of memory to inform the other. For example, you’ve become accustomed to your commute to work and know it’s relatively short (semantic memory), but over the past three days you’ve been arriving late due to heavy traffic (episodic memory), so you choose to take a different route next time.

Research from my team has found that disagreements in your brain over possible routes can happen. Different types of memory can come up with different solutions for what route you can take, and this conflict is a big factor in how hard your brain needs to work when navigating an environment.

Responding to new and familiar memories

Habits stem from what researchers call stimulus-response memories. These include the knee-jerk reaction you might have to familiar landmarks – when you perceive these places, your brain signals you to make a turn along your commute without needing to consciously think about it.

Habits are rigid, but they can also be beneficial: By taking care of the navigation for you, habit frees up your brain to have a conversation with someone or plan what to make for dinner when you get home.

When navigating less familiar routes or environments, where habit doesn’t kick in automatically, you rely on brain regions such as the hippocampus to call on detailed memories from recent experiences to help guide the way.

But let’s say you’re shopping at a new grocery store where most things are where you expect them to be, even though you’ve never been in this particular store before. What happens when your brain experiences both something new and something familiar about an environment?

Researchers have shown that when something about an environment is familiar and aligns with your prior experiences, the prefrontal regions of your brain – those responsible for executive functions such as decision-making – become more active. They can bypass or even inhibit your hippocampus’s ability to form new memories about specific events.

In other words, your brain can weave information about a new experience into your database of existing knowledge, rather than storing it as completely new information with little relation to the past. This process may help fast-track your understanding about new experiences.

Updating cognitive maps

Researchers know that cognitive maps of the environment depend on the hippocampus and its database of memories about specific events. However, I and other researchers argue these maps can also function as a schema – a collection of memories made up of associations between environmental details. You can add new information to these collections and use it to infer new relationships.

Say a new pedestrian bridge is built between the park and the post office. Your brain can more easily weave this new route information into your existing memories compared with learning a new environment from scratch. Similarly, if you just moved to a new town and know very little about the spatial layout, you might rely on your past experiences of towns to infer where something is.

Using neuroimaging techniques as well as virtual reality programs designed to test a participant’s ability to navigate different routes, my team found that there is likely an interdependent relationship between the brain areas that store memories of specific events and areas that store related information across memories when planning to navigate less familiar places.

New routes are more difficult to follow when they differ from your prior experiences. Thus, a stronger schema helps integrate your knowledge of the spatial relationships between locations and landmarks (such as the distance between the post office and the park) with more general knowledge (such as prior route difficulty). This all informs how you choose to navigate.

Navigating daily life

These memory principles help explain why inconsistencies with your previous experiences can make it so difficult to navigate many aspects of daily life.

Imagine you woke up tomorrow and the GPS on your smartphone was no longer available. How will you plan your route to get to your destination?

You might be used to navigating north from your home to the grocery store – but have you ever tried to navigate to that grocery story from a different location? It’s much harder!

Factors such as stress, aging and general cognitive decline can affect brain function and human behavior. Imagine how much harder that new route to the grocery store is for an older adult.

Relating new information to your prior experiences may help strengthen your schema and make navigation easier. And understanding what processes the brain needs to go through to solve these navigation problems can help you understand why getting around can be challenging.

This work was supported in part by grants from the National Institute on Aging of the NIH.