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

So why do gasoline prices differ so much from region to region? Economists attribute it to a range 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, the prices of which are set by supply and demand. But it must also be transported to a refinery, processed and then shipped to individual service stations, which have their own operating costs. Each link in this chain is reflected in what consumers pay at the pump, and this cost varies greatly depending on location.

Most U.S. refining capacity is along the Gulf Coast, particularly in Texas and Louisiana, said Pavel Molchanov, director and equity research analyst at Raymond James, an investment bank and a financial services company. A gas station located far from a refinery can expect a steep markup, he says.

“Gas delivery to Texas is obviously cheaper because the refineries are right there,” Molchanov said. “In places where there are no refineries, fuel has to be delivered over thousands of miles, and it costs more.”

The East Coast, for example, has an extensive pipeline network that carries gasoline and jet fuel; the largest is Colonial Pipeline, which runs from Houston to New York. But this configuration 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 gasoline tax of 18 cents per gallon, but states apply their own levies, which are typically used to fund infrastructure projects, and they can vary widely. .

According to the Federation of Tax Administrators, West Coast drivers pay some of the highest fuel taxes in the country. That works out to nearly 57 cents per gallon in California, 49 cents in Washington and 38 cents in Oregon.

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

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

Clean energy regulations can increase costs nationally and locally. Regulations governing the mixing of chemicals called “gasoline” mean gas stations have to pay more in some states to provide cleaner fuel.

The Air Resource Board of California, for example, maintains a series of requirements applying to the specific formulation that gas producers and importers can sell in the state, applying strict rules to 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.

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

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

National and state gas price data comes from AAA. Locations of oil refineries and pipelines, as well as processing capacity, are from the US Energy Information Association. Throughput capacity is as of January 1, 2021 and shown in barrels per day of flow, or the maximum amount a refinery could produce if operating at full capacity all day. Data on state tax rates were provided by the Federation of Tax Administrators.