• Why Are There Such Big Differences In Prices Of Gas Around The Country?

  Filed under General
  Sep 23

  Data from the Energy Information Administration (EIA) indicates that certain states have much higher retail gasoline prices than others.The factors that contribute to both regional and local gas price variations are as follows:

  1) Sales Tax Rate variations

  2) Distance From Source of Supply Such As Ports, Refineries, Pipeline and Blending Terminals. In 2007 close to 70% of the crude oil that was processed by American refineries was imported by way of ocean tankers. The source of approximately 40% of the gasoline produced in the US is the Gulf Coast, which is also the origination point for a majority of the major gas pipelines.

  3) Disruption In Supply Such As Maintenance Of Refinery Operations - planned and unplanned - slows or shuts down gasoline production. An example of unplanned shutdowns are when the Hurricanes, Katrina and Rita in 2005 devastated the Gulf Coast. These events prompted bidding for available gas supplies. When transportation systems are unable to support the flow of supplies from region to region, prices will continue to be comparatively high.

  4) Operating Costs and Number of Competitors - reflected in the prices which are often highest where there are fewer retail gas stations.

  California Gas Prices - Why Are They Higher And More Variable Than In Other States?

  1) California has relatively few supply sources for their unique blend of gasoline outside of their own state. This is due to the reformulated cleaner fuel program in California which is more stringent than that of the Federal Government.

  2)  The state sales tax in California is 7.25%. Add to that the 18.4 cent per gallon Federal  and the 18 cents per gallon State excise tax and you have the highest total tax on gas in the nation.

  3) Because of the state’s high demand for gasoline, California’s refineries need to be running at full capacity all the time. If multiple refineries experience operating  difficulties at the same time, the state’s supply can become very limited and as a result, prices climb to very high levels. The supplies on the Gulf Coast if available and ordered by California during one of these periods, can take a very long time to arrive due to California’s substantial distance from those sources. This long distance can keep the spike in prices go on longer and can make them higher.

  4)  California is one of the states in the US that has banned Methyl Tertiary Ether (MTBE) after it was found in the water supply. In place of MTBE, Ethanol, a non-petroleum product
  usually made from corn is being substituted.The way gasoline with Ethanol is produced and
  distributed is unique and when this change was put in place back in 2003, prices surged during the transition.  Since then, similar problems have occurred in other regions as a result of similar fuel transitions in other states.

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  Tagged as: california gas prices, fuel program, price variations, retail gas stations, retail gasoline prices
  

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