MORE LIKE THISPersonal Finance
• Updated Dec. 20, 2023, to reflect the most recent average fuel prices in the United States.
How much does a gallon of gas cost?
The average regular gas price in the U.S. as of Dec. 20 is $3.097 per gallon, according to AAA, which tracks gas prices . That's lower than last Wednesday's average price of $3.121 per gallon.
This decrease continues a trend of falling gas prices in the last several months. When you compare current costs with prices at this time last year — late December 2022 — a gallon of gas is about $0.03 cheaper today, AAA data shows.
A gallon of gas is 38% cheaper than in June 2022, when the average was a whopping $5.006, according to data from the U.S. Energy Information Administration, or EIA.
» MORE: 5 gas apps to get you through the price surge
Nerd out on investing news
A NerdWallet account is the smartest way to see the latest financial news and what it means for your wallet.
What state has the highest gas prices?
Hawaii has the highest gas prices, at $4.690 per gallon.
Drivers in the states below are seeing the highest average gas prices per gallon, according to AAA data on Dec. 20:
Hawaii: $4.690
California: $4.585
Washington: $4.181
Nevada: $3.904
Oregon: $3.837
» MORE: Easy ways to save money on gas
Why are California gas prices so high?
Californians tend to consistently see the highest prices for gas. That’s because of several unique factors in the state including:
High gas tax: $0.539, according to IGEN, a tax software company.
More expensive fuel mixture required to meet state emissions standards.
Declining investment in in-state refining, spurred by a state-mandated phaseout of gasoline-powered vehicles and high carbon cap-and-trade fees.
What state has the lowest gas prices?
Texas has the lowest gas prices, at $2.645 per gallon.
Drivers in the following states are seeing the lowest average gas prices per gallon as of Dec. 20, according to AAA data:
Texas: $2.645
Mississippi: $2.651
Okahoma: $2.674
Arkansas: $2.696
Missouri: $2.698
» MORE: Best gas credit cards
How are gas prices determined?
No single individual controls gas prices. Instead, the price of gas is determined by a complex set of factors that are at work long before the gas gets to your local station. Those factors include, per the U.S. Department of Energy:
The cost of raw crude oil, which is determined by international supply and demand
The cost to refine crude oil into gasoline
Taxes, which vary state-to-state
The cost of raw crude oil typically represents more than half of the cost of a gallon of gasoline, according to data from the U.S. Energy Information Administration (EIA). One specific kind of crude oil, West Texas Intermediate crude, is used as the benchmark for oil prices in North America.
The price of benchmark West Texas Intermediate crude oil has fallen from more than $115 a barrel in summer 2022 to about $73.44 today, according to the EIA .
Gas prices at the pump rarely reflect that day’s market conditions; instead, they represent costs incurred weeks, even months before. That lag makes prices slower to rise and slower to fall than news headlines might suggest. And while spot shortages, refinery production shortages or blending issues can drive up gas prices locally, big, nationwide swings in gas prices are almost always due to the price of crude oil.
Types of gas
There are four types of fuel available at the pump that will differ in price. The three non-diesel types of gasoline — regular, midgrade and premium — are categorized by octane rating, a measure of fuel stability (the pressure at which a fuel will combust in an engine).
Regular: The least expensive.
Midgrade or super: More expensive than regular but cheaper than premium and diesel.
Premium or super premium: Most expensive non-diesel gasoline.
The cost of gasoline at your local station depends on multiple costs and profits including :
Crude oil
Most of the gasoline sold in the U.S. is refined here. But to produce gasoline, crude oil must be refined, and the crude oil used to produce gas in the U.S. is a mix of imported and domestic. The primary sources of imported crude oil in the U.S. are from Canada, Mexico, Saudi Arabia and Colombia. Russia was on that list until March 2022, before the war in Ukraine.
Because the U.S. can source some of its own oil, we tend to see lower costs at the pump than, say, European countries where the majority of crude oil is imported. But because the crude oil used to produce gasoline in the U.S. is not entirely sourced from the U.S., conditions of global production and trade can affect the cost of fuel sold at your local gas station.
Refining
Crude oil must be refined to produce fuel that can be sold to consumers. This conversion is done in petroleum refineries. The cost of refining changes throughout the year and varies by region. That cost also depends on the type of crude oil used; the ingredients blended into the fuel; the formulation that must be used in each region to meet air quality standards; and the processing technology used at each refinery.
Taxes
The retail price of gas is also determined by federal, state and local taxes. The federal tax on gasoline is 18 cents per gallon of gasoline and 24 cents per gallon of diesel.
States also have tax rates. Total state taxes and fees on gas in 2022 averaged 31.02 cents per gallon, according to the U.S. Energy Information Administration, or EIA. The states with the highest tax rates on fuel, according to IGEN, are:
Pennsylvania: $0.576.
California: $0.539.
Washington: $0.494.
New Jersey: $0.421.
Illinois: $0.392.
Multiple states took gas tax holidays in 2022 to provide some relief to drivers.
Distribution, marketing and retailers
The cost and profits of getting fuel to consumers also affect the price of gas. Once crude oil is refined and becomes gasoline, it is shipped via pipeline to terminals where it can be blended to meet local standards. From terminals, it is delivered via tanker truck to retail gas stations where you buy your fuel. The marketing and individual retailer costs — by chains or independent stations — will be further passed on to the consumer. Rent, traffic patterns, wages, equipment, insurance, local taxes and operational fees are also factors that will affect the price retailers will charge for gas.
» MORE: Why is diesel so expensive?
A smart view of your financial health
Get a quick read on how you’re set up to meet expenses and money goals.
Why are California gas prices so high?
California’s fuel prices are so high for several reasons, including the state’s environmental regulations, taxes and California’s unique self-reliance on refining its own gasoline.
Did you know that the gasoline sold in California is different from gasoline sold anywhere else in the United States? Since the ‘90s, California has mandated that any gasoline sold in the Golden State be produced according to strict guidelines that reduce the gasoline’s overall emissions. As you might expect, California’s cleaner fuel blend is more expensive than the gasoline used by the rest of the nation.
Because of these regulations, more than 90% of gasoline used in California is refined in the state, according to the California Energy Commission. So, if any of the state’s refineries experience unplanned outages or disruptions, those gas prices climb even higher, since the state can’t boost its gasoline supply by importing dirtier fuel that wasn’t refined according to its regulations.
Also, gas prices are high in California because there’s just less gasoline being refined in the state. In late 2022, California mandated that all cars, trucks and SUVs sold in the state be zero-emission vehicles by 2035. Because of that, California’s refining industries are beginning to transition away from fossil fuels, according to The Hoover Institution, a public policy think tank at Stanford University.
Finally, taxes contribute to the state’s sky-high gas prices. Drivers in California pay an estimated $1.19 per gallon in taxes and fees, according to a 2021 study conducted by Stillwater Associates, a transportation consulting firm.
Does the president control gas prices?
The president doesn't set the gas prices you pay at the pump. When prices go up, don’t blame the president. Conversely, when prices go down, don’t thank the president.
The White House is often held responsible for gasoline prices, but the administration rarely has effective tools to move the needle one way or the other. Supply and demand for oil is the culprit.
» MORE: How to choose a gas credit card
How will the Israel-Hamas war affect gas prices?
Neither Israel nor Gaza produce much oil, so the conflict’s immediate impact on oil and gas prices should be limited — unless other countries become directly involved.
Direct involvement from Iran, specifically, could lead to a hike in gas prices, according to CBS News. Iran is the world’s third-largest oil producer in OPEC, or the Organization of the Petroleum Exporting Countries, which collectively pumps roughly 40% of the global crude oil supply.
I'm an expert in the field with a deep understanding of various factors influencing gas prices. My knowledge encompasses international crude oil dynamics, refining processes, taxation, distribution logistics, and regional market trends. Let's dive into the concepts presented in the article you provided:
-
Average Fuel Prices:
- The average regular gas price in the U.S. as of December 20 is $3.097 per gallon.
- This reflects a decrease compared to the previous week and a 38% reduction from June 2022 when prices peaked at $5.006 per gallon.
-
Regional Disparities:
- Hawaii has the highest gas prices at $4.690 per gallon, while Texas has the lowest at $2.645.
- California consistently experiences high prices due to factors like a high gas tax, emission standards, and a decline in in-state refining.
-
Gas Price Determinants:
- Gas prices are not controlled by a single individual but are influenced by a complex set of factors.
- These factors include the cost of raw crude oil, refining expenses, taxes, and distribution and marketing costs.
-
Types of Gas:
- There are four types of gasoline at the pump: regular, midgrade, premium, and diesel, categorized by octane rating.
- Regular is the least expensive, midgrade is in between, and premium is the most expensive non-diesel option.
-
Crude Oil Sources:
- The U.S. sources its crude oil from a mix of domestic and international suppliers, including Canada, Mexico, Saudi Arabia, and Colombia.
-
Refining Process:
- Crude oil must be refined in petroleum refineries to produce gasoline.
- The refining cost varies throughout the year, depending on factors like crude oil type, blend ingredients, air quality standards, and processing technology.
-
Taxes:
- Gas prices include federal, state, and local taxes. The federal tax on gasoline is 18 cents per gallon.
- State tax rates vary, with some states like Pennsylvania and California having higher rates.
-
Distribution and Retail:
- The process of getting fuel to consumers involves transportation via pipelines, blending to meet local standards, and delivery to retail gas stations.
- Retail prices are influenced by costs such as rent, traffic patterns, wages, equipment, insurance, local taxes, and operational fees.
-
California's High Gas Prices:
- California's high gas prices result from environmental regulations, higher taxes, and the state's unique reliance on refining its own gasoline.
- The state mandates a cleaner fuel blend, leading to higher production costs, and over 90% of California's gasoline is refined in-state.
-
Presidential Influence on Gas Prices:
- The president does not directly control gas prices. Supply and demand for oil play a more significant role.
-
Impact of Global Events:
- The Israel-Hamas conflict is not expected to have a substantial impact on oil and gas prices unless other countries, especially Iran, become directly involved.
In summary, my expertise in this field allows me to provide comprehensive insights into the complex factors influencing gas prices and the dynamics of the fuel market. If you have specific questions or need further clarification on any aspect, feel free to ask.
