Gasoline prices are inching up lately due to the increase in the price of crude oil. The media often reports regional differences in gas prices, but seldom goes deeper in examining why. One reason is differences in State gas taxes assessed per gallon of gas. Embedded in the price of a gallon of gas at the pump is a Federal gas tax of $.18 ("18 cents") plus the State tax. This link
Gasoline prices and taxes by state will take you to an interactive graph showing each States retail price of gas AND the State tax per gallon (you have to subtract 18.4 cents from the total to get the state tax). Texas and Californial have a pretty large difference in retail price--$2.85 vs $3.28 respectively. The State gas tax in Texas is $.20 and the State tax in California is $.461, a difference of $.261. If we factor out the difference in State taxes, we find the "real" price of gas in California is $3.02 ($3.28 minus $.261) compared to $2.85 in Texas. Still higher, but not as dramatic. What else could account for the relative difference in prices?
Now, this does not make motorists in California feel any better but it does make the gas price comparison a little more honest.
Upon 30 seconds of reflection, I find at least one hole in my analysis (a pretty big one)....Look at the graph and see if you can find out what I missed...EXTRA CREDIT on the final is at stake!!!
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I live in New York State, pretty close to New Jersey, and is is a common thing for people here to go to Jersey for gas. Something like 32 cents per gallon difference, based on your link. Plus, in Jersey they pump it for ya.
ReplyDeleteThose guys probably get some good tips.
Have a good holiday, Gene.
There are probably many different reasons but the big one that I can think of is the formula requirements. Each state has its own set of formula requirements to produce gas and different emission requirements. California has more strict formula requirements and many more additives have to be put into the gas to meet those requirements. The more the gas has to be refined and added to the more it cost to produce and the more it cost the people to offset suppliers cost. That is one big thing that I can find in the gas prices.
ReplyDeleteArt--I recently read an article in the NYTIMES about that. I have never been to, or even driven through (at least I dont remember), NJ so I did not know people cant pump their own gas until just a few weeks ago. I would feel strange not doing it myself. Have a great Christmas and I am glad you found my blog and I am even happier I found yours...I am slowly but surely understanding your point of view! :)
ReplyDeleteBrandon---I believe what you say is true and that certainly increases the cost of production, hence the price ultimately. That is an excellent analysis of bow the supply side is affected by input costs. You have earned your usual extra credit!! :) The one thing I noticed that makes a difference is the "average gas tax" number. If you take the average and subtract the federal tax of 18.4 cents you get an average nationwide state tax of 27.2 cents. Texas is 7.2 cents less than than the average and California is 46.1, significantly above the average. One might say, relative to other states, Texas rate is low and California's is too high. Probably looking at the MEDIAN (list all of the states taxes and pick the one in the middle) might be a better way of looking at it, but I am too lazy to break that down right now! There is extra, extra credit for you to extend that analysis! :) Have a great Christmas!!