States with the Highest and Lowest Gasoline Taxes

Gasoline, gasoline, or whatever you call it, is a significant portion of the budgets of millions of Americans. When prices rise, the budget gets stretched. As a result, high gasoline prices hurt people with low incomes the most. Also, when gas prices rise, a lot of confusion arises about the reason. Some politicize it, blame the President or any political party. Others blame corporate greed. However, these are fringe elements with minimal impact. Let’s look at the most important factors that determine the price we pay at the pump.

Retail Petrol Prices: An Overview

The price of gasoline (obtained from crude oil) is mainly determined by four factors. They are extraction, refining, distribution and marketing, and taxes and fees. The following table contains information.

Factor I: Oil must be extracted from the ground. The extracted oil is either light or heavy and is sweet or sour. Light, sweet crude oil produces the most gasoline per barrel of oil while heavy, sour oil produces the least. The cost of drilling also varies from rig on land to above water, and to fracking. Note: The price of oil is determined by the supply and demand in the global market. After it is extracted, the oil is sent to the refiner.

Factor II: Refiners distill the oil, add additives, which include ethanol, and produce gasoline. Although there are refiners spread across the US, many are in the Midwest, Oklahoma and New Jersey. However, the greatest concentration of refiners is located along the Gulf Coast from Alabama to Texas.

Factor III: Gasoline is shipped to locations in the US where it is stored in large tanks until it is delivered to local filling stations. This is an important variable in the final cost at the pump. For example, California has a large population, but only a handful of refineries. Sometimes it may be necessary to ship gasoline from Gulf Coast refineries to meet the need. Thus, the cost of delivery is an important factor in the final price.

Factor IV: State and local taxes and other fees are added to the cost. There is a lot of discrepancy here. States with a higher median income may be able to impose a higher gasoline tax than a state with a lower-income population. In any event, the end result is the price we pay at the pump.

According to the Energy Information Administration. The price of oil accounted for 56% of the retail price of gasoline in the 2020s, making it the most important factor. Refining and distribution and marketing each accounted for 14% of the total and taxes accounted for about 16% of the cost at the pump.

Highest and Lowest State Gas Tax Rates

The federal government, as well as every state, taxes the price of gasoline. The federal gasoline tax has been 18.4 cents per gallon since 1993. The average state gasoline tax is about 19.0 cents per gallon as of February 2021. Which States Have the Highest Gasoline Taxes? Who has the lowest tax?

As of January 2021, California had the highest effective gas tax, followed by Pennsylvania, Illinois, New Jersey and Nevada. The ten highest state gasoline tax rates can be seen in the following graph.

Which state has the lowest petrol tax? Alaska, Missouri, Mississippi, New Mexico and Arizona have the lowest effective gas tax rates. The following chart shows the 10 states with the lowest gas taxes.

Some states, such as Virginia, index their gasoline tax for inflation. Another state, Maryland, has suspended its gas tax. Other states are also considering suspending the tax.

What determines the price of retail gasoline? The most important factors are the cost of oil, the cost of refining, the cost of distributing gasoline, and the amount of federal and state taxes. Everything else is secondary. While politicians can restrict drilling on federal lands and refiners can modify the cost of refining, these are secondary to the four factors listed.