Working Paper

The Incidence of Fuel-Price Shocks and Tax Holidays: Evidence from the 2026 Oil Shock

Abstract: We measure the distributional incidence of U.S. motor-fuel tax holidays using transaction records from ∼13,200 gasoline stations linked to neighborhood income. The 2026 Iran War raised gasoline expenditure shares 2.9 times more in the lowest- than highest-income census tracts. Pre-shock exposure accounts for 89% of the gap while the residual heterogeneity widens rather than offsets it. State-level tax holiday lowered retail prices but offset the same fraction (28%) of the per-gallon burden across quintiles. A counterfactual federal holiday preserves this incidence. Per-gallon relief is burden-proportional as it attenuates the shock’s level without correcting its regressive income gradient.

JEL Classification: H22; H23; Q41; Q48;

https://doi.org/10.24149/wp2624

Bibliographic Information

Provider: Federal Reserve Bank of Dallas

Part of Series: Working Papers

Publication Date: 2026-08-06

Number: 2624