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Biden wants to suspend gas tax: what does it mean for oil stocks?

President Joe Biden will urge Congress on Wednesday to suspend federal taxes on gasoline and diesel for three months to curb surging fuel prices.

Stephanie Link reacts to the news

The Energy Select Sector SPDR Fund is down nearly 5.0% this morning but Hightower’s Stephanie Link is convinced the news doesn’t mean much for the oil giants. On CNBC’s “Squawk Box”, she said:

I don’t think it’ll have a big impact. It’s a proposal only and a temporary measure. So, you want to stay patient on this sector and look for opportunities. Because you’ll see positive earnings revisions and more shareholder returns.

Biden administration expects the policy to bring gas prices down by $1.0 per gallon. There are, however, slim chances that the Congress will approve such a tax holiday as it could also mean higher profits for gas companies rather than savings at the pump.   

Energy stocks are trading at reasonable valuations

A week ago, the Senate Finance Committee announced plans of levying a 21% surtax on windfall profits of big shot oil and gas companies to introduce a gasoline subsidy for the American consumer. According to Stephanie Link, though:

It’s noise. These stocks are trading at very reasonable valuations, doing the right things for shareholder returns. They’ve been increasing production. It’s not like they’re not doing anything. Refineries are at 90% capacity. How much more can they do?

The federal gas tax is used for road construction and repair. The White House, however, is confident that a $10 billion hit to the “Highway Trust Fund” over the three-month period could be offset via other sources of revenue.

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