Why is gas so expensive in some US states and not others?

So why do gasoline costs vary so much from region to region? Economists attribute it to a combination of forces related to supply chains, the local cost of doing business, taxation, and environmental policy, among other factors.

Crude oil is a global commodity, the price of which is determined by supply and demand. But it must also be transported to a refinery, processed and then shipped to individual gas stations, which have their own operating costs. Each link in this chain reflects on what consumers pay for the pump, and this cost varies widely depending on the location.

The bulk of US refining capacity is located 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 company. He says that a gas station located far from a refinery can expect a significant increase.

“It’s obviously cheaper to deliver gas in Texas because the refineries are there,” Molchanov said. “Where there are no refineries, the fuel has to be delivered maybe thousands of miles, and that costs more.”

The East Coast, for example, benefits from an extensive network of pipelines that transport gasoline and jet fuel. The largest is the Colonial Pipeline, which runs 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 major role: All motorists pay the federal gasoline tax of 18 cents a gallon, but states charge their own fees, which are generally used to fund infrastructure projects, and can vary widely.

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

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

With fuel prices soaring, some states, including Florida, New York and Georgia, have paused their gasoline taxes.

Clean energy regulations can increase costs at the state and local levels. Regulations governing the mixture of chemicals referred to as “petrol” mean that gas stations must pay more in some states to serve cleaner-burning fuels.

The California Air Resources Board, for example, maintains a collection of Requirements Applying to the specific formula that gas producers and importers can sell in the country, and applying strict rules to chemicals like benzene, formaldehyde and sulfur. As a result, the country imports a lot of Middle Eastern gas, according to GasBuddy’s head of petroleum analysis, Patrick de Haan.

“California is a petroleum island, if you will,” says de Haan.

Regulations for so-called cleaner gasoline, or CBG, can also come into force within individual states. Retail Compliance in Arizona Standards For gasoline, Phoenix and the surrounding area have stricter limits, for example, while Tucson and other parts of the state have less stringent requirements.

The average price of gasoline in Maricopa County, where Phoenix is ​​located, is approximately $5.70 per gallon. But it’s still less than $5 in nearby Yuma and Pima counties.

Data on national and state gas prices come from AAA. Petroleum refinery and pipeline locations, along with processing capacity, from the American Energy Information Association. Processing capacity is as of January 1, 2021 and is reported in barrels per day of stream, or the maximum amount that a refinery can produce if it runs at full capacity throughout the day. State tax rate data provided by Tax Officials Association.