The Real Reasons Some States Pay More at the Pump

As I drive into town each day from my home in the Central California hills, I come to a corner with two gas stations. Every day, they charge significantly different prices. On one side of the street, the Chevron station is currently advertising $6.29 per gallon, while across the street, Great Gas (a North Carolina-based company) advertises $5.49. Both prices are too high for comfort, but an $0.80 difference between them seems huge to me.

Not only that, but if you drive 400 miles north to Oregon, the average price for gas (as of this post’s publication) is only $5.00. And if you go east, the price is even less. In fact, the national average price for gas as of this writing, according to AAA, is only $4.16, which means that people in some places are paying less than $4.00 per gallon.

What’s up with these price variations? Let’s take a look.

What Determines the Price of Gas?

People love to blame the President when gas prices spike, but as NPR’s Business Desk explains, the President has very little control over gas prices (although government policies can and do have a limited effect). The U.S. Energy Information Administration (EIA) states that the real determinants of the price at the pump are fourfold:

• Cost of crude oil
• Refining costs and profits
• Distribution and marketing
• Taxes

The cost of crude accounts for a half of the price at the pump. Recently, the loss of supply resulting from the closure of the Strait of Hormuz caused the price of crude to top $100 a barrel, and that raised gas prices across the globe. The other three factors, however, are more dependent on location.

Refining costs account for about 15 percent of the current gas price, and they are higher in states that require seasonal blends or during periods after disasters, when supplies are stretched. Distribution costs account for another 16 to 18 percent. They are higher in remote areas and areas far from oil sources.

And then there are state, federal and local taxes, which account for about 16 percent of the price.

How Much Do State Gas Taxes Add to the Price?

The federal government imposes an 18 cent-per-gallon tax on gasoline, and states levy 33.55 cents per gallon, on average. State taxes vary, and in some cases there are local taxes to pay as well. The Institute on Taxation and Economic Policy (ITEP) explains that 24 states levy a fixed tax while 26 states levy a variable tax based on a percentage of fuel prices. Of the latter, 18 states include the cost of transportation in the variable tax rate. State taxes may also include levies for inflation and infrastructure costs and for efforts to reduce vehicle emissions and improve fuel efficiency.

States with the Highest Gas Prices

According to World Population Review, the four states with the highest gas prices in 2026 were California, Hawaii, Washington and Oregon. They are all Western states, as are the next two in the list: Nevada and Alaska.

Why Is Gas So Expensive in My State?

I live in California, and with gas prices currently reaching $7 or more in some places, it takes the cake for having the highest gas prices in the country. Journalist Michael Satterfield explains why he thinks this is so: “There are several reasons why California has higher gas prices,” he says. “The main one that is easy to point to is their higher gasoline taxes. You’re often paying over a $1.50 per gallon just in state and local taxes. Couple this with special fuel requirements, thanks to the California Air Resources Board, which means that only refineries in California produce that special gasoline.” The number of such refineries has fallen from 50 in the year 2000 to about 20 today, he adds.

“Within the state, pricing can vary due to local sales tax rates and additional local environmental fees,” Satterfield continues. “Not only that, but Californians pay a statewide excise sales tax that can be as high as 10.75%, depending on where you are at in California.”

States with the Lowest Gas Prices

The four states with the lowest gas prices in 2026 were Alabama, Tennessee, Louisiana and Mississippi.

Why Is Gas So Cheap in My State?

An important factor is distance from supply, which is why the Gulf Coast states (AL, AR, LA, MS, NM and TX), being as close as they are to the oil supply, have some of the cheapest gas in the country, according to the EIA. A fixed tax plan with a lack of surcharges for inflation, infrastructure and environment also works to keep prices down.

FAQ

Do Gas Prices Vary Within the Same State? Why?

Yes. They can even vary in the same city, and two stations located across the street from each other can have significantly different prices. The reasons for this include brand recognition (Chevron and Shell always set higher prices), fuel quality (the advertised reason for the higher prices from suppliers like Chevron and Shell), competition, and traffic volume. Communities within a state can also charge local taxes that raise the price per gallon within those communities.

Are City Gas Prices Higher Than Rural Areas?

Usually, the opposite is true. Rural prices are generally higher because of the cost of transporting gas to remote areas. Add to that a lower volume of traffic, which forces stations to charge higher prices to increase profit margin and stay in business.

About the Expert

• Michael Satterfield is an award-winning journalist, branding expert, and founder of The Gentleman Racer—a leading online publication covering automotive culture, travel, and lifestyle.

Sources

• American Automobile Association: Fuel Prices; (2025)
• National Public Radio: Whether gas prices are up or down, don’t blame or thank the president; (2022)
• U.S. Energy Information Administration: Gasoline explained – Factors affecting gasoline prices; (2025)
• Institute on Taxation and Economic Policy: Two in Three Americans Live in States with Variable-Rate Gas Taxes; (2025)
• World Population Review: Gas Price by State 2026; (2026)
• U.S. Energy Information Administration: Gasoline explained – Regional gasoline price differences; (2025)

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