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 percent across the country. In many of these, gas prices are on the verge of falling below $3 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 percent 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 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.
1. South Carolina
- Regular gas price per gallon: $2.99
- Tax per gallon: 16.8 cents (4th lowest)
- Number of operating oil refineries: 0
South Carolina has the lowest average gas prices in the nation, and is the only state currently under the $3 per gallon mark. Compared to last year, gasoline prices in the state have decreased by 10.5 percent -- tying Mississippi for the highest proportional decrease in the country. Low prices in South Carolina are likely due in part to the low tax per gallon of 16.8 cents, which is the fourth lowest in the country. South Carolina’s prices have fallen by about 19 percent since their early April peak of $3.70.
- Regular gas price per gallon: $3.06
- Tax per gallon: 18.8 cents (7th lowest)
- Number of operating oil refineries: 3
Gasoline prices are down about 18 percent from Mississippi’s yearly peak in the first week of April. The state ranks among the lowest in total taxes and fees per gallon of gas, which help keep its fuel prices low. The three refineries in Mississippi process 364,000 barrels of raw crude per day, the 11th most in the country. Low carrying costs for fuel could therefore also contribute to the state’s low gasoline prices. There is just a 19 cents per gallon tax for gas sold in Mississippi, the seventh-lowest in the country. The state also has no sales tax to drive up what people pay at the pump.
- Regular gas price per gallon: $3.07
- Tax per gallon: 20.9 cents (14th lowest)
- Number of operating oil refineries: 3
Alabama has three major refineries that process 120,000 barrels of crude each day. The state also had a 36-cent decrease in gas prices last year -- the highest decline in the nation. Gasoline prices continue to drop rapidly in the state, with an 8 percent decline last month alone. Transportation costs in Alabama are the ninth lowest in the country, and the state has the eighth-lowest excise tax, at 16 cents per gallon.
- Regular gas price per gallon: $3.08
- Tax per gallon: 21.4 cents (15th lowest)
- Number of operating oil refineries: 1
Average gas prices in Tennessee have decreased by 9.7 percent in the past 12 months (the fourth-biggest decline in the country). In the past month alone, gas prices fell by 28 cents, an 8.3 percent decrease. According to the Cost of Living Index, low gas prices help drivers in Tennessee enjoy the seventh-lowest cost of transportation in the U.S. Tennessee drivers also pay the 15th-lowest state taxes on gas in the nation, at just 21.4 cents to the gallon, according to the American Petroleum Institute.
- Regular gas price per gallon: $3.16
- Tax per gallon: 20 cents (tied for 12th lowest)
- Number of oil refineries: 18
Louisiana is second to Texas in the number of oil refineries and gallons of oil processed per day, at more than 3.2 million barrels between its 18 major refineries. With close proximity to offshore drilling in the Gulf and the relatively low state tax on gas -- 20 cents per gallon -- Louisiana drivers pay some of the lowest gas prices in the nation.
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