Energy Business

The 10 States With the Cheapest Gas

A record 50% of Americans strongly disapprove of President Barack Obama’s handling of the economy, a recent Washington Post-ABC News survey shows. A whopping 65% are unhappy with his handling of gas prices. While national gas prices have increased 8% in the past month alone, the increase has not been uniform across all states, with some fairing far better than others.

Read The 10 States With the Cheapest Gas

Despite the fact that the national average is about to hit $4.00 per gallon, some states with the lowest prices have actually seen gas prices fall recently. 24/7 Wall St. reviewed average gasoline prices across the 50 states to identify where it was most inexpensive. Many of the states where gas is cheapest benefit from access to crude oil and refineries and also enjoy a low cost of living.

One of the factors explaining low gas prices in some states is simply geography. The reason gas costs more in the coastal regions compared to the central U.S. is partly due to access to oil fields and refineries. States in the South and the West, excluding the Pacific coast, are either close to oil fields or to pipelines. This proximity keeps the cost of transporting crude to the refineries low compared to states that have to rely on freight. Many of the Southern and Western states also have more refineries than the coastal regions. As a result, the cost to ship gasoline from the refineries to the gas pump is also lower.

In fact, the presence of refineries appears to affect gas prices significantly. Eight of the 13 states with the lowest gas prices have at least three refineries. States with relatively high gas prices, including Connecticut and New York, have none.

Because East Coast refineries produce only about 8% of total gasoline in the U.S., well below the population’s needs, these states have to import gasoline from the Gulf of Mexico. This keeps prices high. To make matters worse, several major refineries in the northeast have shut down, or are in the process of shutting down, because of the rising costs of shipping crude to these areas.

Meanwhile, booming oil production and the presence of multiple refineries in Wyoming and Montana has driven prices down substantially. The cost of crude oil in these areas is also cheaper because pipelines do not exist to move it from the fields to refineries outside of the region. Because the market for the crude is limited, the price to refineries is cheap. As a result, prices at the pump are also low.

States with low gas prices tend to have a low cost of living and low median income. Most products and services are inexpensive in the states with the cheapest gas. That is at least in part because the local economies cannot sustain higher prices. Six of the states have among the lowest costs of living, according to the Missouri Economic Research and Information Institute (MERIC), which measures expenses including housing, health care, food costs, as well as gas prices. These states also have relatively low median household incomes, with seven of the 10 having among the lowest median incomes in the country.

Finally, states with the lowest gasoline prices also have low excise taxes on gas. Six of the 10 states featured in this article are among the 15 states with the lowest gas taxes. Wyoming, which has the lowest gas prices in the country, has the second-lowest tax rate.

24/7 Wall St. ranked the 10 states with the lowest gas prices based on data from the American Automobile Association’s Fuel Gauge Report. Median income and population data was taken from the U.S. Census Bureau. The number of refineries by state was taken from the U.S. Energy Information Administration. Gas tax rates was taken from the Tax Foundation.

These are the 10 states with the cheapest gas.

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