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Why Gasoline Prices Differ from Region to Region

Although price levels vary over time, energy information administration data indicate that average retail gasoline prices tend to typically be higher in certain states or regions than in others. Aside from taxes, there are other factors that contribute to regional and even local differences in gasoline prices:

Proximity of supply: Areas farthest from the gulf coast (the source of nearly half of the gasoline produced in the U.S.) ten to have higher prices. The proximity of refineries to crude oil supplies can even be a factor, as well as shipping costs (pipeline or waterborne) from a refiner to market.

Supply disruptions: Events that slow or stop production for a short time, such as refinery maintenance, can prompt bidding for supplies. If the transportation system cannot support the flow of surplus supplies from one region to another, prices remain comparatively high.

Competition in the local market: competitive differences can be substantial between a locality with only one or a few gasoline suppliers versus one with a large number of competitors in close proximity. Consumers in remote locations may face a trade-off between higher local prices and the inconvenience of driving some distance to a lower- priced alternative.

Environmental programs: Some areas of the country are required to use special gasolines. Environmental programs aimed at reducing carbon monoxide, smog and air toxins, include the Federal and/or State-required oxygenated, reformulated and law-volatility (evaporates more slowly) gasolines. Other environmental programs put restrictions on transportation and storage. The reformulated gasolines required in some urban areas and in California cost more to produce than conventional gasoline served elsewhere, increasing the price paid at the pump.

Operation costs: Even stations located adjacent to each other have different traffic patterns, rents and sources of supply that influence retail price.
 

 

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