Why Gas Is So Expensive in Some US States But Not Others


How do gas prices compare to

national average

How do gas prices compare to

national average

How gas prices compare to the national average

How gas prices compare to the national average

Rising gas prices have taken a toll on drivers in every state this year, making everyday life more expensive in many ways. But the burden was not evenly distributed.

Californians were paying well over $5 a gallon months before the national average hit that figure on June 11. In Chicago, the average is approaching $6, but it remains nearly a dollar cheaper elsewhere in Illinois. Fuel costs in rural Southeast and Midwest areas lag far behind their coastal counterparts.

So why do gasoline costs differ so much from one area to another? Economists attribute this to a number of forces related to supply chains, the local cost of doing business, taxes and environmental policy, among other factors.

Crude oil is a global commodity whose prices are set by supply and demand. But it also has to be transported to a refinery, processed and then sent to individual fuel stations, which have their own operating costs. Each link in this chain is reflected in what consumers pay at the pump, and that cost varies significantly depending on location.


Sources of supply for transport fuels

oil refineries

(scaled by processing power)

oil products pipeline

The Gulf Coast is the largest domestic supplier

of transport fuels with just over half

total US refining capacity.

Sources of supply for transport fuels

oil refineries

(scaled by processing power)

oil products pipeline

The Gulf Coast is the largest domestic supplier of

fuels for transport with just over half of the total

US refining capacity.

Sources of supply for transport fuels

oil refineries

(scaled by processing power)

petroleum product

plumbing

Whiting, Ind.

440,000 barrels a day

Linden, NJ

272,000

barrels per

day

Carson, California.

382,000 barrels a day

The Gulf Coast is the largest

supplier of transport fuels with only

more than half of total US refining capacity.

Largest US capacity:

639,000 barrels per day

Sources of supply for transport fuels

oil refineries

(scaled by processing power)

petroleum product

plumbing

Whiting, Ind.

440,000 barrels a day

Linden, NJ

272,000

barrels per day

Carson, California.

382,000 barrels

per day

The Gulf Coast is the

largest national supplier

of transport fuels

with just over half of the total

US refining capacity.

Largest US capacity:

639,000 barrels per day

Sources of supply for transport fuels

oil refineries

(scaled by processing power)

oil products pipeline

Whiting, Ind.

440,000 barrels a day

Linden, NJ

272,000

barrels per day

Carson, California.

382,000 barrels a day

The Gulf Coast is the largest

supplier of transport fuels with only

more than half of total US refining capacity.

Largest US capacity:

639,000 barrels per day

Most of the US refining capacity is along the Gulf Coast, particularly Texas and Louisiana, said Pavel Molchanov, director and equity research analyst at Raymond James, an investment bank and financial services firm. A gas station located far from a refinery can expect a good profit margin, he says.

“Gas supply in Texas is obviously cheaper because the refineries are right there,” Molchanov said. “In places where there are no refineries, the fuel has to be delivered perhaps thousands of kilometers, and that costs more.”

The East Coast, for example, benefits from a vast network of pipelines that transport gasoline and jet fuel; the largest is the Colonial Pipeline, which stretches from Houston to New York. But this setup cannot be replicated on the West Coast because the Rocky Mountains prevent similar access to Gulf Coast refineries.

Taxes also play a key role: All drivers pay a federal gas tax of 18 cents per gallon, but states levy their own rates, which are often used to fund infrastructure projects, and can vary significantly.

West Coast drivers pay some of the highest state fuel taxes in the country, according to the Federation of Tax Administrators. That comes to nearly 57 cents a gallon in California, 49 cents in Washington and 38 cents in Oregon.

But the highest state tax rate belongs to Pennsylvania, at 58 cents a gallon. The lowest can be found in Alaska, at around 9 cents.

As fuel prices soared, some states, including Florida, New York and Georgia, lifted their gas taxes.

Clean energy regulations can increase costs at the state and local level. Regulations governing the blending of chemicals referred to as “gasoline” mean that gas stations have to pay more in some states to serve cleaner-burning fuel.

The California Air Resources Board, for example, maintains a number of requirements applicable to the specific formulation that gas producers and importers can sell in the state, enforcing strict rules on chemicals like benzene, formaldehyde and sulfur. As a result, the state imports a lot of gas from the Middle East, according to GasBuddy’s head of oil analysis Patrick De Haan.

“California is an oil island, if you will,” says De Haan.

Regulations on so-called cleaner-burning gasoline, or CBG, may also come into play in individual states. Arizona’s retail compliance standards for gasoline impose stricter restrictions on Phoenix and surrounding areas, for example, while Tucson and other parts of the state have less stringent requirements.

Gasoline in Maricopa County, where Phoenix is ​​located, averages $5.70 a gallon. But it remains below $5 in neighboring Yuma and Pima counties.

Data on national and state gas prices come from AAA. Oil refinery and pipeline locations, along with processing capacity, are from the US Energy Information Association. Processing capacity is as of January 1, 2021 and reported in barrels per day of flow, or the maximum amount a refinery could produce if it operated at full capacity all day. State tax rate data was provided by the Federation of Tax Administrators.

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