Tuesday, June 5, 2007

How Much It Costs to Fill Up Depends on Where You Are

A very readable article in the Wall Street Journal, about the regional differences in the price of gasoline. Basically, it depends on state taxes, transportation costs, and issues at your local refinery.

. . . . To be sure, costs are always higher for certain places than for others. For one, gasoline taxes vary widely from state to state. In New York, for example, taxes as of March 2007 were almost 61 cents a gallon, while in Alaska, they ran only 26 cents a gallon, according to API, an oil industry trade group.

Transportation costs also bump up gas prices in places far from refineries. Prices in the Midwest, which has to ship in about 35% of the gas it consumes, are usually more expensive than in the Gulf Coast, the country's major refining hub.

But currently, most of the difference in prices can be attributed to refinery snags that have affected some regions more than others. Although they have fallen slightly, fuel prices in Chicago are still among the highest in the country. Most of the increase can be tracked to a single refinery just outside the city in Whiting, Ind., analysts say. At least two other refineries in the Midwest also have cut production recently due to maintenance and glitches.

The Gulf Coast was also recently hit by outages at several large refineries, pushing up gas prices temporarily, although not as high as in the Midwest because the Gulf Coast region produces more than double the amount of gasoline it consumes. . . .

"As supplies shift around to areas where the price is higher, we typically see prices decline in the high-price regions and prices go up elsewhere," says Dough McIntyre, an analyst with Energy Information Administration, a federal agency.

In California, gasoline prices tell yet a different story. The state has some of the most stringent gas specifications in the country to cut pollution, and it isn't well-connected to the rest of the country via pipelines. The result is that prices there are determined largely by what goes on locally. Although refineries in California had some trouble last year and earlier this year, supplies have been steady lately.

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