Gas Surges Above $3 In These States as Oil Prices Jump

By Douglas A. McIntyre Published Feb 21, 11:29AM EST

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Gas Surges Above $3 In These States as Oil Prices Jump — © Marina113 / iStock Editorial via Getty Images

The best predictor of gasoline prices is oil prices. They almost always outweigh refinery costs, transportation costs and state gas taxes. Crude oil prices, which were $36 a barrel at the end of November, have risen to almost $60, the highest price in a year. Gas prices have started to follow. In three states, they have topped $3 a for a gallon of regular.

According to AAA Fuel Gauge, the average price for a gallon of regular nationwide is $2.631. That is up from $2.505 a month ago. Over the past four weeks, the increase has been fairly steady.

Oil prices have risen for three reasons, none of which is likely to change soon. The first is that global stockpiles have fallen. World Oil recently said of crude inventories:

Crude inventories at a key storage hub in the U.S. are now below their five-year average, and nationwide inventories continue to slump, an early indication that Saudi Arabia and allied producers are succeeding in their efforts to eliminate a glut.

The other factor has been called “post-vaccine euphoria.” The base of this is that the economy has already started to spring back from the COVID-19 pandemic. If the rate of vaccine distribution quickens, global economies will reopen and gross domestic product and employment will surge, and with these, the demand for oil.

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Finally, refinery shutdowns due to the huge cold and snowstorms that have run through Texas. These massive refineries are critical to U.S. supply.

Gas prices by state are either above or below the national average for several reasons. The first is proximity to refineries. States near the huge refineries along the Gulf of Mexico tend to have the lowest prices in the country. Notably, the four states with the lowest per-gallon gas prices are Mississippi ($2.25), Texas ($2.30), Oklahoma ($2.33) and Louisiana ($2.26). The transportation costs from refineries to nearby areas shaves the average price of gas down, compared with much of the rest of the nation.

Another primary factor is gasoline taxes. According to the American Petroleum Institute survey of state gas taxes as of January 1, the U.S. average is $0.5523 a gallon. States with low gas taxes include Missouri ($0.3582), Mississippi ($0.3719) and New Mexico ($0.3738). The states with the highest gas taxes are California ($0.8145) and Pennsylvania ($0.7710). These are the states with the highest gas taxes in America.

Three states currently have average prices for a gallon of regular of over $3. California’s $3.452 price is clearly affected by its gas tax. In Hawaii, the price of $3.288 is affected by a relatively high gas tax at $0.6524 per gallon. However, the cost of transportation to islands that are 2,500 miles from the west coast is also a major contributor to Hawaii’s price. And, the price for a gallon of regular in Washington State is $3.10. Its gas tax is a high $.678.

Gas prices nationwide were last at $3 a gallon in 2014. There is still a long way to go before prices reach that level again. However, crude prices are on a sharp climb upward, which means gas prices will continue to increase, for now, as well. Moreover, gas prices can affect overall living costs in some places. This is the cost of living in every state in America.

Click here to read Texas temperatures surge above 70 degrees after storm

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.