People often wonder why prices of gas tend to vary somewhat significantly from state to state. Of course competition and the supplier affect the price, and since there is not a set rate for gas there is bound to be some change in price throughout the nation. But why is it that there is often a $.50 per gallon difference between the cheapest state’s average and the most expensive?

The answer is that there are a variety of causes. Some are obvious like location: Alaska may have oil deep below its surface, but auto shipping gas hundreds of miles North for such a sparsely populated state is difficult and therefore expensive. In the middle of July 2008 gas hit $4.62 a gallon, the highest in the nation. Hawaii is in a similar situation, being in the middle of the Pacific, and a relatively small state.

Location is not the only factor however. California has been notorious for high prices but for another unique reason. After decades of horrendous and dangerous smog in large Californian cities like LA, California has had a real push to clean up the environment, simply because it wasn’t safe to breathe the air. To cure this smog problem, many regulations have been put in place, most involving car emissions, ( auto transport companies could only ship in new cars that met stricter emission standards than the rest of the country) but also a regulation that makes California only purchase a special kind of fuel. This fuel is mixed with ethanol, making it better for the environment and Los Angeles’ smog problem, but it is also more expensive. The refineries in Oregon and Washington produce the product, and have a pipeline to Alaska, but the unique nature of the fuel makes it more expensive than normal gasoline, no matter what the circumstances.

The third factor in the price variations is the tax that each state puts on gas sold in that state. In Europe the tax is responsible for nearly 60% of the price of gasoline, but luckily for automobile transport in the US it is far less. Missouri for example, traditionally has the cheapest gas in the United States, as its gas tax is only 17 cents a gallon. And unlike other states, it does not impose a sales tax on top of that which many states do. The result of these regulations? Less revenue for the state for one, but very low gas prices: $3.86 in July when Alaska was at $4.62. The real issue here though is global gas prices, so once the governments find a way to bring those down, we can all breathe a little easier.