What makes gas prices vary so much across the country? – Jalopnik

We live in an age where the prices of goods and services are shaped by multiple interacting forces. As a result, the same product – such as a can of Coca-Cola – can cost $2 in one store and $3 in another. At its core is price dispersion, a pragmatic economic concept that describes how identical goods are sold at different prices to different sellers. This happens because retailers have specific operating costs (rent, wages, taxes, etc.), all of which affect the price you pay at the counter. In addition, specific goods also have unique cost structures and regulatory frameworks.

Fuel is an important commodity that is highly regulated by the market and in high demand. Given that an EV winter is coming, this will likely remain the case until we are ready to embrace electrification on a larger scale. According to the US Energy Information Administration (EIA), there are approximately 160,000 gas stations in the country, all operating within local and economic realities. What are those local and economic realities, and what causes gas prices to be so different across the country? The answer lies in the complex interplay of local markets, infrastructure and economy.

Crude oil is the crude input to gasoline, just as milk is the crude input to cheese. This means that crude oil is the most important price factor. If the cost of crude oil rises, fuel will likely follow suit. Because oil is highly sensitive to geopolitical and global events, its volatility and supply are often reflected in the price you pay at the local pump. According to the MER (EIA Chart 2023), approximately 52.6% of the average US gasoline price is attributable to the cost of crude oil.

Geographically, not every region has the same access to crude oil. Areas such as the Gulf Coast are near large crude oil fields. This means it is actually easier to deliver crude oil – and cheaper. If we look at the AAA gasoline price chart, you can immediately see how Oklahoma, Mississippi, Arkansas, Louisiana, and Texas (all states on the Gulf Coast or states near the Gulf Coast region) have the cheapest gasoline in the country.

In our national gas price comparison for Thanksgiving 2025, these were also some of the states with the cheapest gas prices. It’s pretty much the same story when you order Uber Eats: you’re more likely to pay less if you live near the restaurant. Additionally, if you live near areas rich in crude oil, there is more crude oil in circulation, meaning it is less susceptible to disruptions and other factors that can increase local fuel costs.

The federal excise tax rate on gasoline is 18.4 cents per gallon. However, when you add state and local taxes to the mix, the price changes. According to Consumer AffairsCalifornia has the highest gas tax rate at 68 cents per gallon. On the other hand, Alaska has the lowest state-imposed gas tax rate at just $0.0895. If we look at the AAA For comparison, we can see that the price in California is set at $4,496 per gallon, while Alaska is $3,450.

Granted, taxes are only part of the story, and the reasoning behind gas prices in California and Alaska is a lot more complex, but they still make a difference. In the 2023 MER According to the table, federal and state taxes represent 14.4% of the price you pay at the pump. Tax rates also change constantly, sometimes tied to factors such as inflation, wholesale fuel prices, or state budget needs such as major road infrastructure projects. For example, some states are even considering taxing retail deliveries to pay for roads if gas taxes remain the same.

Environmental regulations also play a major role, as U.S. refineries must refine dozens of different fuel blends to meet local and national emissions standards. This is part of the federal Reformulated Gasoline (RFG) program mandated by Congress through the 1990 Clean Air Act amendments. Therefore, gas sold in major metropolitan areas such as Chicago, New York or Houston must meet stricter emissions standards, further driving up prices.

For crude oil to actually become gasoline, it must be refined, and that’s where prices also differ. In the US, refining capacity is unevenly distributed. According to MERMore than half of U.S. refining capacity is on the Gulf Coast, but regional fuel consumption is less than a third of production. This also plays into the fact that Oklahoma, Mississippi and Louisiana have some of the cheapest fuel costs in the country.

On the other hand, West Coast refineries have a total capacity of roughly 2.55 to 2.87 million barrels per day, which represents about 13.9% to 15.6% of total U.S. refining capacity. This means that to subsidize demand, gasoline must be imported. According to EIA data reported by OPIS/Dow Jones in 2025, West Coast gasoline imports averaged 129,000 barrels per day. Some areas on the West Coast are also not connected to major pipelines, and that will further increase costs because importing gasoline is more difficult.

In certain situations, West Coast markets will even import fuel from abroad. With Trump’s tariffs, that could raise fuel prices by as much as 70 cents per gallon. During the summer, fuel blends can also change, meaning refineries in major population centers may have to switch to more emissions-friendly summer blends, and that can, you guessed it, drive up prices. As we look to our 2023 MER The graph shows that refining costs and profits account for 18.7% of the price at the pump.

Regardless of where a refinery is located, once fuel is refined, that fuel must be transported to terminals and gas stations. It is understandable that distances, logistics, storage and road costs differ. That can have a drastic impact on the price you pay at the pump. We already talked about Alaska having the lowest state-imposed gas tax in the country, but when you look at average fuel prices of $3,450, it’s far from the cheapest in the country.

Most gasoline used on Alaska’s roads is produced and refined within the state, although some crude oil is sent out of state for export or sale in the national market. Gas costs are also affected by Alaska crude oil prices being tied to West Coast oil rates and limited refining competition. This is also why the most expensive states to buy fuel are typically on the West Coast or places like Alaska.

As we look to our 2023 MER graphics, distribution and marketing of fuel accounts for 14.3% of the price we pay at the gas station. Hawaii is in a similar position, meaning fuel prices will likely be higher than in states more accessible to transportation and pipelines due to its geographic isolation. Add in bad weather, pipeline disruptions and shipping delays, and prices could rise even further.