What Causes Gas Prices to Drastically Differ?
The rise in gas prices over the last couple of years has led many to question what is causing the increase. Others wonder why gas prices fluctuate so drastically between different states, cities and often gas stations in the same city or county.
The debate about gas prices usually ends up becoming a political one. For the last two years, people on social media pages were quick to point their finger at President Joe Biden for the recent spike in prices. But others, including Biden, blamed factors such as the war in Ukraine or global supply/demand issues for the fast rise in cost.
Last summer, gas prices seemed to rise all over the country, reaching record-high costs in some places. According to a Business Insider article, gas prices soared to an average of nearly $5 per gallon last May versus much of the country seeing prices less than $2 per gallon in May 2020.
The weekly data provided by the US Energy Information Administration (EIA) also showed that states along the West Coast of the U.S. saw bigger increases than the rest of the country. The data showed that gas prices on the West Coast increase by $1.84 per gallon from May 2021 to May 2022.
What Causes Gas Prices to Be Higher in Some States?
According to the EIA, it is normal for gas prices to fluctuate over time and vary among states and regions. “In addition to differences in state and local taxes, other factors contribute to regional differences in gasoline prices, including distance from the supply, supply disruptions, and retail competition and operating costs,” the EIA website reported.
John Tremor of AAA told KSL Newsradio in Utah that gas is normally higher in Western states due to their distance from oil sources. The further away from the source, a state is, the higher the prices will be.
For example, last summer gas prices in Colorado proved to be much lower than in states like Utah or California. “The ease of getting oil is the number one thing that is going to affect your prices,” he said. “There are other things like demand in your state that could be affected by things like tourism or population size. There are things like state taxes, Colorado may have a cheaper state tax than Utah. But it’s where you get your oil from.”
What Causes Local Gas Prices to Differ?
Everyone knows that driving around the Springs, gas prices can fluctuate from one side of town to the other. During parts of last summer, residents of Woodland Park went to social media platforms to point out that prices in the city were drastically higher than in Colorado Springs, which is just under 20 miles away. A search on GasBuddy.com proved that gas prices in Woodland Park were over a dollar a gallon more than the lowest gas prices in Colorado Springs.
According to the President of the Greater Woodland Park Chamber of Commerce Debbie Miller, it is unclear what exactly has caused the local disparity in gas prices. But she did say that supply and demand come into play and that each station owner has the right to set whatever prices they want within certain legal limits.
She used stations on 8th Street in Colorado Springs as an example when she explained how competition drives prices. She explained that if a station across the street from another one lowers its prices, then the other one is forced to do so. “When you look up here in Woodland Park and look at the stations within the city and they are all within 10 cents and nobody has dropped theirs, I don’t see that there is an incentive to drop prices,” Miller said.
Since the summer ended, prices have been on the decline. In Colorado Springs in mid-September, gas prices fluctuated from $3.54 per gallon to $3.79 per gallon. Woodland Park seemed to be one of the last cities in Southern Colorado to see costs lower but it was down to $3.89 per gallon of regular-grade gas in September, which was a 60-cent drop from last August.
