Why gas is so expensive in some US states but not others

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

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

The bulk of US refining capacity is along the Gulf Coast, especially Texas and Louisiana, said Pavel Molchanov, director and stock analyst at Raymond James, an investment bank and finance company. A petrol station that is far away from a refinery can expect a hefty surcharge, he says.

“Delivering gas in Texas is obviously cheaper because the refineries are right there,” Molchanov said. “In places where there are no refineries, the fuel may have to be delivered thousands of miles, and it costs more.”

The east coast, for example, benefits from a large network of pipelines carrying gasoline and aviation fuel; the largest is the Colonial Pipeline, which stretches from Houston to New York. But that 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 motorists pay a federal petrol tax of 18 cents per gallon, but states levy their own taxes, which are usually used to fund infrastructure projects, and they can vary considerably.

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

But the highest state tax rate belongs to Pennsylvania, at 58 cents per gallon. The lowest is found in Alaska, at about 9 cents.

As fuel prices have risen, some states, including Florida, New York and Georgia, have suspended gas taxes.

Regulations on clean energy can increase costs at the state and local level. Regulations governing the mixing of chemicals referred to as “gasoline” mean that gas stations have to pay more in some states to operate cleaner burning fuels.

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

“California is a gas station, if you will,” says De Haan.

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

Gasoline in Maricopa County, where Phoenix is ​​located, averages nearly $ 5.70 per gallon. But it is still under $ 5 in neighboring Yuma and Pima.

Data on national and state gas prices come from AAA. Petroleum refineries and pipeline locations, along with processing capacity, are from the US Energy Information Association. The processing capacity is as of 1 January 2021 and reported in barrels per flow day, or the maximum amount a refinery could produce if it ran at full capacity all day. Government tax rate data were provided by Association of tax administrators.