The 10 States With the Cheapest Gas

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Published March 13, 2012

| 24/7 Wall St.

A record 50% of Americans strongly disapprove of President Barack Obama’s handling of the economy, a recent Washington Post-ABC News survey shows. A whopping 65% are unhappy with his handling of gas prices. While national gas prices have increased 8% in the past month alone, the increase has not been uniform across all states, with some fairing far better than others.

Despite the fact that the national average is about to hit $4.00 per gallon, some states with the lowest prices have actually seen gas prices fall recently. 24/7 Wall St. reviewed average gasoline prices across the 50 states to identify where it was most inexpensive. Many of the states where gas is cheapest benefit from access to crude oil and refineries and also enjoy a low cost of living.

Read the article on 24/7 Wall St. com

One of the factors explaining low gas prices in some states is simply geography. The reason gas costs more in the coastal regions compared to the central U.S. is partly due to access to oil fields and refineries. States in the South and the West, excluding the Pacific coast, are either close to oil fields or to pipelines. This proximity keeps the cost of transporting crude to the refineries low compared to states that have to rely on freight. Many of the Southern and Western states also have more refineries than the coastal regions. As a result, the cost to ship gasoline from the refineries to the gas pump is also lower.

In fact, the presence of refineries appears to affect gas prices significantly. Eight of the 13 states with the lowest gas prices have at least three refineries. States with relatively high gas prices, including Connecticut and New York, have none.

Because East Coast refineries produce only about 8% of total gasoline in the U.S., well below the population’s needs, these states have to import gasoline from the Gulf of Mexico. This keeps prices high. To make matters worse, several major refineries in the northeast have shut down, or are in the process of shutting down, because of the rising costs of shipping crude to these areas.

Meanwhile, booming oil production and the presence of multiple refineries in Wyoming and Montana has driven prices down substantially. The cost of crude oil in these areas is also cheaper because pipelines do not exist to move it from the fields to refineries outside of the region. Because the market for the crude is limited, the price to refineries is cheap. As a result, prices at the pump are also low.

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States with low gas prices tend to have a low cost of living and low median income. Most products and services are inexpensive in the states with the cheapest gas. That is at least in part because the local economies cannot sustain higher prices. Six of the states have among the lowest costs of living, according to the Missouri Economic Research and Information Institute (MERIC), which measures expenses including housing, health care, food costs, as well as gas prices. These states also have relatively low median household incomes, with seven of the 10 having among the lowest median incomes in the country.

Finally, states with the lowest gasoline prices also have low excise taxes on gas. Six of the 10 states featured in this article are among the 15 states with the lowest gas taxes. Wyoming, which has the lowest gas prices in the country, has the second-lowest tax rate.

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24/7 Wall St. ranked the 10 states with the lowest gas prices based on data from the American Automobile Association’s Fuel Gauge Report. Median income and population data was taken from the U.S. Census Bureau. The number of refineries by state was taken from the U.S. Energy Information Administration. Gas tax rates was taken from the Tax Foundation.

These are the 10 states with the cheapest gas.

10. Idaho
> Price per gallon, regular: $3.60 (tied for ninth)
> Cost of living: ninth lowest
> Median household income: $43,490 (13th lowest)
> Tax per gallon: 25 cents (25th highest)

Idaho is tied with Alabama for having the ninth-lowest gas prices in the country, with regular selling for $3.60 per gallon. Gas prices actually have fallen by 12 cents in Idaho in the past five months. The state’s cost of living is also the ninth-lowest in the country, although the cost of transportation is not as low compared to the other states. The median household income in Idaho is also rather low.

9. Alabama
> Price per gallon, regular: $3.60 (tied for ninth)
> Cost of living: 13th lowest
> Median household income: $40,474 (5th lowest)
> Tax per gallon: 20.9 cents (14th lowest)

The price of a gallon of regular unleaded in Alabama is just $3.60, tied with Idaho for the ninth-lowest gas prices in the country. A number of factors work to keep gas prices low in the state. Alabama is located along the Gulf of Mexico, allowing it access to offshore as well as shipped oil. The state also has three oil refineries, which helps to reduce gas transportation costs. Gas taxes are also quite low. At 20.9 cents per gallon, gas taxes are the 14th lowest in the country.

8. Tennessee
> Price per gallon, regular: $3.59
> Cost of living: 2nd lowest
> Median household income: $41,461 (sixth lowest)
> Tax per gallon: 21.4 cents (15th lowest)

Tennessee has among the country’s lowest median household incomes. It also has the second-lowest cost of living. Although the price of regular gas has increased by nearly 40 cents in Tennessee over the past five months, it remains among the lowest rates in the country. The state also has a relatively low tax on gas. Tennessee is home to a single oil refinery, located in Memphis.

7. Mississippi
> Price per gallon, regular: $3.59
> Cost of living: eighth lowest
> Median household income: $36,851 (the lowest)
> Tax per gallon: 18.8 cents (seventh lowest)

The cost of a gallon of regular gasoline in Mississippi was $3.26 five months ago. Today, it is $3.59 per gallon. Mississippi has the lowest median income and the highest poverty rate in the country. While this 33 cent increase likely has hurt the budgets of state residents, prices are still quite low compared to most of the country. Like Alabama, Mississippi has access to the offshore drilling production of the Gulf of Mexico, which, along with the presence of three refineries, helps temper the price of gas. Gas taxes are also just 18.8 cents per gallon, the seventh lowest in the country.

6. Arkansas
> Price per gallon, regular: $3.58
> Cost of living: fifth lowest
> Median household income: $38,307 (third lowest)
> Tax per gallon: 19.0 cents (ninth lowest)

The price of a gallon of regular gas has increased by 30 cents in Arkansas in the past five months to $3.58 per gallon currently. Despite the increase, this is still the sixth-lowest price in the country. Arkansas has the third-lowest median household income and the fifth-lowest overall cost of living in the country. The overall cost of transportation in the state is the third-lowest in the nation. Arkansas also has one of the lowest gasoline taxes among the states at 19 cents per gallon.

For the full list, read the article on 24/7 Wall St. com

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