Energy Business

The 10 States With the Cheapest Gas

Michael B. Sauter, Alexander, Samuel

Since the start of the year, gasoline prices have risen by more than 49 cents — the biggest increase in the first two months of any year on record. The current national price, which is just under $3.80, is the most expensive gas has been since October. Once again, $4.00 per gallon nationwide is beginning to look like a real possibility.

Already, gas prices in four states are at least $4.00 a gallon, and in another three states they are just 10 cents away. There are, of course, other states where the price of gas remains closer to $3.00 a gallon than $4.00 a gallon, despite the recent massive increase in prices. In Wyoming, filling up the tank of a F-150 — the most popular vehicle sold in America last year — would cost roughly $85. In Hawaii, that same tank would cost $113.49. Based on the latest fuel prices posted by the American Automobile Association, 24/7 Wall St. reviewed the 10 states with the cheapest gas.

While the northern leg of the Keystone XL pipeline awaits U.S. State Department approval, the cheap oil coming from the Bakken Shale region is largely staying in the northwest region and the Rockies. Those states are the main beneficiaries because Bakken crude sells for less than oil originating in the southern states or abroad. If oil is only transported within the state, less transportation expenses are tacked onto the final price and gas prices in those states are cheaper.

As a result, four of the five cheapest states are in the Northwest or Rocky Mountain region. These include Wyoming and Montana, which have the cheapest and second-cheapest gas in the country and where essentially all the Bakken oil is refined. As of January 1, those two states had 10 operating refineries between them. Relative to its population, Wyoming had the third-highest operating oil refinery production per day. Montana had the fifth highest.

While proximity to cheap oil is important, gas taxes also clearly have a big impact on how much people finally pay at the pump. Six of the 10 states with the lowest prices have an added state and federal tax of less than 40 cents per gallon, compared to a national average of nearly 50 cents. The four states with relatively higher taxes — Montana, Utah, Idaho and Colorado — are among those states benefitting from their proximity to Northwest oil production.

24/7 Wall St. ranked the 10 states with the lowest gas prices based on data from the American Automobile Association’s Daily Fuel Gauge Report. The prices are as of February 27. The Median household income for 2011 and population data for 2012 was obtained from the U.S. Census Bureau. The U.S. Energy Information Administration provided us with the number of refineries by state. Gas tax rates for January 1, 2012, came from the American Petroleum Institute. We also reviewed data on the relative cost of transportation in the fourth quarter of 2012 for each state, provided by the Missouri Economic Research and Information Center.

These are the 10 states with the cheapest gas.