Special Report

States with the Cheapest Gas

Gasoline prices are close to their lowest levels in nearly three years. They have plummeted from more than $3.60 per gallon at the end of the summer to just $3.22 per gallon. The cost of a gallon is roughly a quarter cheaper than it was this time last year

There may be several reasons behind the falling gas prices. Some point to the decreasing threat of United States involvement in Syria. A more likely factor is that North American oil production and better rail transportation to refineries are forcing crude prices down. Also, it has been suggested that, in the long term, the increasing fuel efficiency of cars is driving down demand, and therefore prices at the pump.

Click here to see the States with the Cheapest Gas

Of course, on a national basis, prices vary widely. In states like California and Alaska, gas is still well over $3.50 a gallon. In Hawaii, the average gas price is $4.08 per gallon. On the other end of the spectrum are states where gas prices are lower than the national price of $3.22 per gallon. In four states, gas costs less than $3.00 a gallon. These include Missouri, where gas is just $2.86 a gallon. States where gas prices are cheaper benefit from proximity to oil refining capacity and lower gas taxes. Using AAA’s Daily Fuel Gauge Report, 24/7 Wall St. reviewed the 10 states with the cheapest gasoline prices.

The cost of transporting gasoline from the refineries to the pumps is a major factor in determining regional gas prices and in explaining the large price disparities. States in the northeast, as well as Hawaii, where prices are traditionally among the highest, have little to no local refinery capacity, and the cost of transporting the fuel is factored into the gas prices.

Many of the states with the cheapest gas, not surprisingly, have a great deal of refining capacity of their own, or are in close proximity to states that have high capacity. Total national refining capacity is about 16.7 million barrels per day. Six of the states with the cheapest gas prices have the capacity to produce well over 300,000 barrels per day each. Texas and Louisiana, which both have cheap gas, have the largest and second-largest refining capacities in the country, respectively. Texas can refine more than 4.75 million barrels each day.

While refining capacity and transportation costs are important factors in determining gas prices, another important factor — if not the most important — is regional gas taxes. The federal gas tax is 18.4 cents per gallon. State taxes and local taxes, however, range anywhere from an additional 12.4 cents a gallon in Alaska to 53.2 cents a gallon in California. The average state and local taxes per gallon is 31.1 cents, but gas taxes in each of the 10 states with the cheapest gas is — at most — 25 cents per gallon.

The regional cost of living is another factor potentially affecting the cost of gas. According to the Council for Community and Economic Research, the relative cost of consumer goods in states with cheaper gas is lower than the U.S. average. Mississippi, which has the seventh lowest gas prices, had the lowest overall cost of living in the nation.

24/7 Wall St. ranked the 10 states with the lowest gasoline prices based on data from the American Automobile Association’s Daily Fuel Gauge Report. The prices are as of November 7. Local gas prices are also as of November 7 and are from GasBuddy.com. Median household income for 2012 and population data for 2012 came from the U.S. Census Bureau. The U.S. Energy Information Administration provided refining and production data for each state. Gas tax rates for October 1, 2013, came from the American Petroleum Institute. We also reviewed data on the relative cost of living and transportation in the second quarter of 2013 for each state, from the Council for Community and Economic Research.

10. Iowa
> Price per gallon: $3.08
> Unemployment rate: 4.9% (8th lowest)
> Total state taxes: 22 cents per gallon (16th lowest)
> Number of refineries: 0

Local refining capacity often translates to lower fuel costs. However, Iowa is one of only three states with the lowest gas prices and no oil refineries. Gas prices in Iowa declined by 20 cents a gallon, or 6%, from a month ago, a larger decrease than in most other states. One explanation for the drop in the already low gas prices could be the introduction of more ethanol-blended fuel, which tends to be less expensive. In Des Moines, Iowa’s capital, gas prices are as low as $2.77 a gallon. In addition to fuel, consumer goods are also relatively inexpensive in Iowa. The cost of living in the state is one of the lowest in the country.

9. New Mexico
> Price per gallon: $3.07
> Unemployment rate: 6.8% (20th lowest)
> Total state taxes: 18.9 cents per gallon (8th lowest)
> Number of refineries: 2 (tied for 17th most)

The price of gasoline in New Mexico has fallen in the past year from $3.43 a gallon to $3.07 a gallon, a drop of more than 10% — one of the largest declines in the nation over that period. The state’s low gas taxes help keep gas prices low. New Mexico residents pay just 18.9 cents in taxes per gallon, more than 12 cents less than the U.S. average. New Mexico is also one of the leading states for oil production, at 272,000 barrels per day as of August. But perhaps most importantly, the state is located in near Texas, which leads the nation in both production activity and refining capacity.

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8. South Carolina
> Price per gallon: $3.07
> Unemployment rate: 8.1% (13th highest)
> Total state taxes: 16.8 cents per gallon (3rd lowest)
> Number of refineries: 0

South Carolina’s low gas taxes are a major reason for the state’s consistent cheap gas prices. Residents pay just 16.8 cents in state and local taxes, less than all but two other states. Largely because of its low taxes, the state actually had the nation’s lowest gas prices at times in recent years. However, the state’s low gas taxes have left little funding for road repairs, The Augusta Chronicle noted in February, repairs that some residents believe the state desperately needs. The paper also noted that, based to one estimate, local drivers “pay an average of $265 each year fixing their vehicles because of poor road conditions.”

7. Mississippi
> Price per gallon: $3.05
> Unemployment rate: 8.5% (8th highest)
> Total state taxes: 18.8 cents per gallon (7th lowest)
> Number of refineries: 3 (tied for 14th most)

Mississippi residents pay less than 19 cents per gallon of gasoline in state taxes, considerably lower than the national average of 31.1 cents per gallon. Mississippi has among the largest refining capacities in the country — its three oil refineries can process 364,000 barrels of oil per day. The state will likely benefit from the recent completion of an underground pipeline running from Norco, La. — near the Gulf Coast — to southern Mississippi. The median household income in Mississippi was $37,095 in 2012, the lowest in the country.

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6. Louisiana
> Price per gallon: $3.03
> Unemployment rate: 7.0% (22nd lowest)
> Total state taxes: 20 cents per gallon (tied for 11th lowest)
> Number of refineries: 19 (2nd most)

Louisiana residents benefit from the state’s critical role in the oil industry. The state can process just over 200,000 barrels of oil per day, more than all but six other states. Its proximity to the nation’s two largest sources of oil production — Texas and offshore in the Gulf of Mexico — helps supply its refineries with crude. The state has 19 refineries and a daily refining capacity of more than 3 million barrels per day. The state is also home to the nation’s only offshore oil port, called the LOOP. The port allows tankers, which cannot reach shore, to offload their oil.

5. Kansas
> Price per gallon: $3.00
> Unemployment rate: 5.9% (14th lowest)
> Total state taxes: 25 cents per gallon (23rd lowest)
> Number of refineries: 3 (tied for 14th most)

Kansas is one of the nation’s larger oil-producing states — at about 130,000 barrels per day — and also one of the larger refining states, with an operating capacity of nearly 340,000 at the start of this year. But the state also likely benefits from its location on the Keystone Pipeline, which passes through the middle of the state. Two major points on the pipeline are Steele City, Neb., and Cushing, Okla. — where oil prices are settled and various types of oil are blended. Both cities are located fairly close to their state’s respective border with Kansas. The lower gas prices contribute to lower transportation costs as well — which were lower in Kansas than in all but six other states as of the second quarter of 2013.

4. Texas
> Price per gallon: $2.98 (tied for 3rd lowest)
> Unemployment rate: 6.4% (17th lowest)
> Total state taxes: 20 cents per gallon (tied for 11th lowest)
> Number of refineries: 27 (the most)

Texas has 27 oil refineries — by far the most of any state. Its refining capacity was also well above that of any other state as of the beginning of this year, at nearly 4.8 million barrels per day. The presence of natural resources and refineries likely helps lower gas prices in the state. In Richardson, located near Dallas, gas is as cheap as 2.67 per gallon. Despite the low cost of fuel in Texas, state legislators recently approved an incentive program that will offer rebates to buyers of electric and natural gas vehicles. The incentives are expected to be available next April.

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3. Arkansas
> Price per gallon: $2.98 (tied for 3rd lowest)
> Unemployment rate: 7.4% (19th highest)
> Total state taxes: 21.8 cents per gallon (15th lowest)
> Number of refineries: 2 (tied for 17th most)

In the past year, gasoline prices in Arkansas have dropped from $3.24 per gallon to less than $3 per gallon. Residents clearly benefit from the state’s proximity to Texas and Louisiana, the nation’s two largest refining states. Arkansas’s relatively low incomes and cost of living may also play a role in keeping gas prices down. Last year, the median household income in Arkansas was just over $40,000, lower than any other state except for Mississippi. Consumer prices are also lower in Arkansas than in much of the rest of the nation, and the cost of transportation in Arkansas is one of the lowest in the country.

2. Oklahoma
> Price per gallon: $2.97
> Unemployment rate: 5.3% (11th lowest)
> Total state taxes: 17 cents per gallon (4th lowest)
> Number of refineries: 5 (6th most)

Oklahomans pay state taxes of only 17 cents per gallon of gasoline, compared with the nationwide average of about 31 cents per gallon. Oklahoma has access to abundant natural resources, including oil. It extracts more than 300,000 barrels of oil per day, among the most in the country. The state’s five oil refineries are capable of refining more than 500,000 barrels per day. In addition to large quantities of oil, Oklahoma also sits on a vast resource of natural gas, more than all but three other states as of 2011. Median household income was well below the nation’s average in 2012. The cost of living, however, was among the nation’s lowest.

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1. Missouri
> Price per gallon: $2.86
> Unemployment rate: 7.2% (22nd highest)
> Total state taxes: 17.3 cents per gallon (5th lowest)
> Number of refineries: 0

Missouri has the lowest gas prices in the nation at just $2.86 per gallon. Yet, the state does not produce or refine any oil. Like several other states, Missouri is advantaged by its proximity to refineries in Louisiana and Texas, as well as to major points along the Keystone Pipeline. The Mississippi River is also used to transport oil and other products, and it connects the Gulf of Mexico and Louisiana with Missouri. Additionally, residents of Missouri pay some of the lowest gas taxes in the nation, totaling just 17.3 cents per gallon.

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