the average price for a gallon of
gasoline in the united states is about
three dollars and 19 cents
however that average conceals a pretty
wide range of prices across the country
the state with the cheapest gas is texas
where on average consumers paid almost 2
dollars and 80 cents per gallon the most
expensive gasoline is found in
california with an average price of 4.38
cents in 2019 the u.s average fuel price
was two dollars and sixty cents a gallon
fifty four percent of that went to the
cost of crude oil eighteen percent went
to state and federal taxes
thirteen percent went to refining costs
and profits and fifteen percent went to
distribution and marketing a closer look
at the cost of a single gallon of fuel
can be even more revealing it can
reflect the number of refineries in a
state and where it is in relation to the
rocky mountains the overall refinery
count in the united states has shrunk
dramatically over the last several
decades that means the country relies on
an ever smaller number of ever larger
plants and is more vulnerable to supply
constraints in the wake of outages
gasoline is traded on the new york
mercantile exchange and spot prices for
gasoline or the prices for futures
contracts act as a kind of benchmark for
prices overall
but those prices can be quite different
from what a consumer ends up paying at
the pump this is in part due to regional
differences in gasoline availability
which is heavily dependent on how many
refineries there are in a region how
productive those refineries are and
whether there is some kind of event such
as a refinery shutdown that is
constricting supply the u.s is split up
into five regions called petroleum
administration for defense districts or
pads for short they were created by
executive order in 1942 and were meant
for managing the distribution of the
domestic petroleum supply
their uses districts for wartime
rationing ended with the end of world
war ii but they continue to be used as a
system for collecting data about
petroleum use around the country
pad 1 is made up of much of the east
coast
pad 2 is most of the midwest pad 3 is
the gulf coast pad 4 is the rocky
mountain region
and pad 5 is the west coast which
includes hawaii and alaska
each region contains its own refineries
which supply most of the local gasoline
under normal circumstances
pad 1 has 7 operating refineries pad 2
has 24 pad 3 has 52
pad 4 has 15 and pad 5 has 26. because
the gulf coast has by far the largest
number of refineries prices there are
generally cheaper and the region is more
insulated from the effects of shocks
such as an outage at any one plant
petroleum can also be sent from one pad
or region to another via a network of
pipelines so if there is an outage in
the midwest fuel prices are liable to
spike but supplies can be sent from the
east coast or gulf coast as needed if
there's a refinery outage in chicago the
region can receive gasoline from the
gulf coast in a matter of three to five
days
the west coast region however is not so
lucky primarily because it is cut off
from the rest of the country by the
rocky mountains there is only one
pipeline that goes to the west coast
region from west texas
so if a refinery in california goes down
there is no real relief mechanism the
only real option for replenishment in
the short term is shipping gasoline from
asia often countries such as singapore
and japan and that can take two to three
weeks this is actually quicker and more
economical than shipping gasoline from
the gulf coast through the panama canal
there have been several notable outages
at plants around the country in recent
years that have caused price spikes
in the summer of 2021 for example
extreme heat forced refineries to
constrain production in the pacific
northwest
there can be even more extreme unplanned
outages hurricane harvey in 2017 shut
down a third of the country's refinery
capacity the bp refinery in whiting
indiana shut down unexpectedly in august
of 2015 in the middle of summer driving
season and basically overnight gas
prices shot up 50 cents to a dollar per
gallon
also in 2015 an explosion at an exxon
mobil factory in torrance california
caused price spikes as did a fire at a
chevron refinery in richmond california
in 2012.
over the last several decades the number
of refineries in the u.s has shrunk
there are 129 operating refineries in
the united states as of october 2021.
this is down from 141 as recently as
2017. in 1982 the first year for which
records are available there were 254
refineries
this means the nation is becoming ever
more reliant on fewer and far larger
refineries that means that in the future
petroleum analysts say the effects of a
single outage will be amplified by the
fact that a single refinery outage
causes a larger drop in total capacity
and the fact that there are fewer
refineries to make up the difference
layered on top of these regional
variations in refinery capacity are
state taxes and policies that also
account for differences in gas prices
the federal gas tax has remained
unchanged since 1993 and many have
called for an increase in order to make
repairs to highways but 36 states have
raised or reformed their gas prices
since 2010. just 10 states have gone two
decades or more without an increase
alaska for example hasn't raised its
gasoline tax in 51 years there is
however quite a wide range between the
lowest and highest tax states
i would say the average state there's
maybe three different main layers that
feed into prices california
is a bit of an abnormality there's
there's probably more like five or six
layers of complexity to california's
prices
uh their high taxes uh change the price
365 days a year but then you have some
abnormalities california has on its own
it has its own requirement for gasoline
uh in terms of of the formulation that's
mandated by the california air resources
board
you have a carbon management program
essentially californians are forced to
pay for how much pollution they're
emitting from their vehicles that adds
up to another 15 to 20 cents a gallon
uh and then you have the fact that much
of california is relatively isolated
from the rest of the country california
which has the most expensive gasoline in
the country also has the highest taxes
in the country at an average of about 85
cents per gallon the national average is
closer to 50 cents a gallon
california also has a carbon management
program which adds further costs
furthermore california requires a unique
blend of fuel which adds an additional
10 to 15 cents in cost per gallon when
there is an outage california supplies
are difficult to replenish in part
because the state's requirements are so
strict many refineries do not have the
ability to produce gasoline that meets
the standards and if they do they still
need the bandwidth
something called the nelson complexity
index measures how sophisticated a
refinery is and what kinds of products
it is able to make out of oil
u.s refineries tend to rank the highest
on the index overall with an average
rating of 9.5 compared with european
refineries with an average of 6.5
there is a refinery in india with a
rating of 14
when marathon oil required the bp
refinery in texas city the company
disclosed a nelson rating index of 15.3
any refinery making fuel that meets
california's standards would likely have
to have a relatively high nelson
complexity rating and that could further
restrict the number of suitable sources
california's gas prices are higher than
those even in hawaii where there is only
one refinery and the cost of living can
be quite high many products need to be
shipped to the string of islands the san
francisco bay area is home to some of
the highest gas prices in the country
in general lower tax states also have
lower gasoline prices
alaska which is one of the most oil rich
states in the u.s is an exception to
this rule it has very low gas taxes
about 20 cents per gallon but its far
northern location climate
geography
sparse population and infrastructure
mean that producing gasoline is
significantly more expensive
some kind of federal carbon tax for
example could be in the country's future
some democrats wanted to add one to
their proposed 3.5 trillion dollar
budget bill in september of 2021
2020 and 2021 have created some unusual
effects including rapidly rising fuel
prices in many parts of the country
well covet is the bulk of the reason why
prices have accelerated so much in the
last six months and it's because america
has been getting back to normal early in
the pandemic demand for gasoline dropped
dramatically as workers were told to
stay home
you'll remember early on in the pandemic
there was a huge change in behavior
americans stopped filling up for a
period of several weeks gasoline demand
plummeted some 60 percent and along with
it the price of oil went into negative
territory for the first time ever as a
result oil companies scaled back
production of crude oil they scaled back
production of gasoline
those are permanent and long-term
changes in 2020 a number of refineries
closed in the western united states
which reduced refining capacity that was
combined with some demand spikes as
people who had been stuck in their homes
for months sought to get out of the
house and take trips these unusual
circumstances have produced some huge
variations in wholesale prices between
the western and eastern u.s tom klosa is
a petroleum analyst and one of the
founders of oil price information
service
this year it has to do with tight
supplies let's say when you get west of
the mississippi
and abundant supplies east of the
mississippi and
differences in wholesale prices that
i've never seen in you know five decades
of doing this cloza expected western
region prices to drop a bit as summer
turned to fall and prices in the eastern
u.s to rise with hurricane season
and now as we come into fall and you
know we go to peak hurricane season
it's going to transfer to the gulf coast
and the east coast
we have less
motor fuel gasoline on the east coast
that meets the reformulated standards
than we have in any driving season since
2012.
but there are longer-term effects of
this that could play out for the rest of
the decade oil companies again made
long-term decisions they shut down
production they laid off tens of
thousands of workers
to try and stay alive during the
pandemic and now
it's the fact that demand has come back
so quick that is pushing gas prices up
to some of these seven year levels but i
think a lot of this is transitory it's a
kind of a new norm as things smooth out
in the future i think we will see prices
again received
you