Fiscal woes in Europe and sluggish job growth in the United States have put downward pressures on oil prices. As a result, gasoline prices declined in all but two states over the past month, dropping 7.1% across the country. In many of these, gas prices are on the verge of falling below $3.00 per gallon.
Despite the overall decline, the range between gas prices among states is still wide. 24/7 Wall St. examined AAA’s Daily Fuel Gauge Report to determine the 10 states whose residents pay the least at the pump. We found that the most decisive factor in determining gas prices is location. Most of the states with low gas prices are located on or near the Gulf of Mexico. They also have among the lowest gas taxes in the country.
Five of the 10 states with the lowest gas prices are located on the Gulf Coast, where a disproportionate amount of crude oil is processed. Furthermore, among the five states not on the Gulf Coast, three border the coastal states. Residents of these three states benefit from lower costs of transporting oil.
“Gulf Coast states benefit from having ready access to the refineries that are in the region,” says AAA spokesperson Michael Green. “In fact, Gulf Coast refineries produce the most gasoline of any region in the country, and generally have a surplus, which means they’re sending gasoline that’s made in Gulf Coast refineries to other parts of the country.”
The states with the lowest gas prices have seen a more precipitous decline in those prices compared to the rest of the country. South Carolina and Mississippi, the states with the two lowest gas prices, now enjoy 9.1% lower prices compared to a month ago. Green points out that West Texas Intermediate (WTI) crude oil, which is produced primarily in the Gulf Coast region, is cheaper than other forms of crude oil and has seen a faster decline in price.
Another factor determining gas prices is a state’s gasoline tax. All but two of the states on this list are in the bottom half of states in terms of total taxes charged, which include a federal 18.4 cents a gallon tax and state taxes. But the relationship between gas taxes and prices is far from perfect. Alaska has the lowest gas tax but the second-highest gas prices. The states with the second- and third-lowest gas taxes, Wyoming and New Jersey, did not make our list.
While not always the case, transportation costs in the states on 24/7’s list tend to be lower than the national average. Nine of the 10 states are in the lower half of states in terms transportation costs, while three are in the bottom 10 states.
AAA provided 24/7 Wall St. with the most recent available average price of regular unleaded gasoline by state. The organization also provided prices from one week, one month and one year ago. 24/7 Wall St. also examined the number of refineries and total refining capacity as of January 1 of this year, provided by the U.S. Energy Information Administration. The American Petroleum Institute provided state gas taxes, which were also as of the beginning of this year. This includes state gas excise taxes, as well as other taxes (including sales tax).
These are the 10 states with the cheapest gas.