Why are gasoline prices higher in some regions?
Although gasoline prices vary over time, they are often higher in certain states or regions. In addition to taxes, other factors contribute to regional differences in gasoline prices.
Distance from supply usually means higher prices
Retail gasoline prices tend to be higher the farther gasoline is sold from the source of supply. These supply sources include refineries, ports, and pipeline and blending terminals. Transportation costs increase when the distance from the source of gasoline supply increases.
Locations of U.S. petroleum refineries, product pipelines, and ports
Source: U.S. Energy Information Administration, U.S. Energy Mapping System
Supply disruptions can cause price increases
Any event that slows or stops the production of gasoline, such as planned or unplanned refinery maintenance or refinery shutdowns like those experienced when Hurricane Katrina and Hurricane Rita hit the U.S. Gulf Coast in 2005, can prompt increased bidding for available gasoline supplies. If the transportation system cannot support the flow of surplus supplies from one region to another, prices will remain relatively high.
Regular grade gasoline average annual prices at retail outlets by region, 2016
(dollars per gallon, including taxes)
Retail competition and operating costs play a role in pump prices
Pump prices are often highest in locations with fewer gasoline stations. Even stations located close together may have different traffic patterns, rent, and sources of supply that influence pricing.
Environmental programs add to the cost of production, storage, and distribution
Some areas of the country are required to use special, reformulated gasoline that includes additives to help reduce carbon monoxide, smog, and toxic air pollutants that result from burning or evaporating gasoline. Other environmental programs have placed restrictions on fuel transportation and storage. These programs tend to add to the cost of producing, storing, and distributing gasoline. About one-third of the gasoline sold in the United States is reformulated.
Why are gasoline prices in California more variable than prices in other states?
California gasoline prices are higher and more variable than prices in other states because relatively few supply sources offer California's unique blend of gasoline outside of the state. California's reformulated gasoline program is more stringent than the federal government's program. In addition to the higher cost of this cleaner fuel, state taxes on gasoline in California are higher than they are in most states.
California refineries run at near full capacity to meet demand
California refineries need to run at near full capacity to meet the state's gasoline demand. If more than one of its refineries experience operating problems at the same time, California's gasoline prices can increase substantially. Even when supplies are available from other West Coast refineries, U.S. Gulf Coast refineries, or from foreign refineries, they can take a relatively long time to arrive in California.