Why do gas prices differ from one state to another?


Quick Answer

Gas prices differ from one state to another in the United States because different states have varying state taxes applied to selling gasoline, are variously remote from gasoline's supply points and have different restrictions on the quality of gasoline. In addition, competition and disruptions in production affect gas prices.

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Full Answer

Gasoline price is made up of four constituent parts. In 2013, 68 percent was attributed to the cost of crude oil, federal and state taxes constituted 12 percent of the price, refining costs and profits were responsible for 11 percent and 9 percent of the price was distribution and marketing, as stated by U.S. Department of Energy.

Gasoline prices in different states also depend on the area's proximity to the point of supply. The latter can be pipeline and blending terminals, refineries and ports. The further these points are, the higher the transportation costs and thus the higher the price. The number of gasoline stations in a given area affects gas prices: the fewer there are, the higher the price.

Closure of refineries due to schedule maintenance operations or a disaster, technological or originating in nature, can cause a gas price spike. Moreover, states maintain different programs of environmental protection, which include requirements to reformulate gasoline so that it is more environmentally friendly when burned. This adds costs to the production of gasoline. California, for instance, has the strictest regulations about its blend of gasoline.

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