Oil prices are rising again, driven largely by ongoing geopolitical tensions and uncertainty in global energy markets. Their effects are already moving beyond energy markets and into state budgets, household finances, and policy debates.
Oil price swings can reshape state budgets quickly, especially in oil-producing states that rely heavily on severance taxes. But even in non-oil-producing states, higher oil prices raise the costs of government services and squeeze household budgets.
In both kinds of states, policymakers should remember that oil price increases are usually followed by declines. In oil-dependent states, those downturns can quickly weaken revenues, jobs, and broader economic activity. In states without significant oil production, rising prices may prompt calls for gas tax holidays—but lawmakers would do well to instead focus on policies that strengthen families’ long-term economic security.
Tax Policy Center
by Lucy Dadayan
March 26, 2026