3 States Where Gas Won’t Fall Below $3

The three major components of gas prices are the price of oil, state gas taxes and how close states are to large refineries. Three states already face the refinery problem and two the high gas tax issue. These are New York, where the current price for an average gallon of regular is $3.14, Alaska with a price of $3.44 and Hawaii, where the price is $3.86, according to GasBuddy.

Gas prices for states far from large refineries stay high because of the transportation costs to move the gasoline to market. Of the 25 largest refineries in the United States, most are located along the Gulf of Mexico, next to some of the richest oil fields in the world. The majority of these are in Texas, followed by Louisiana.

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ConocoPhillips (NYSE: COP) has one large refinery in the Northeast, located in Linden, N.J. That is the only very big facility near New York. The price of a gallon of gas in New York City, by far the state’s largest city, is $3.18.

The refinery problem is even worse in Alaska and Hawaii. Alaska may be one of the largest producers of oil, but that oil has to be moved hundreds miles south to be refined, and then hundreds of miles back to Alaska. Hawaii has an even more difficult problem. It is thousands of miles from refineries in both the United States and Asia.

New York and Hawaii also have high gas taxes. New York has the highest among all states at $0.50 a gallon. Hawaii is third highest at $0.471, according to the Tax Foundation. Alaska has the lowest tax among all states at $0.08. However, with a gas price of $3.45, the tax is not as relevant an adjustment to move gas prices below $2 as in most other states.

Finally, there is the issue of oil prices. Currently, the price is about $68 per barrel. While there are arguments that it could drop further, a number of things could drive the price higher. Among them are potential political and violence in the Middle East and Africa. There is also a convincing argument that some of the largest fracking operations in the United States need oil prices close to $80 to make money. That means their supply could go off-line with prices as low as they are today, which would tend to press oil prices higher.

For a host of reasons, the average price for a gallon of gas will not drop below $3 in New York, Alaska or Hawaii.

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