The price of gasoline continues to decline, thanks to the Biden administration’s decision to release 1 million barrels of oil per day for six months.
The national average for a gallon of regular gas is $4.08, which is three cents less than a week ago and 19 cents less than a month ago. But it’s still $1.22 more than a year ago — a 29.8% increase.
Other fuels saw slight decreases as well.
Mid-grade fuel average $4.49, down from $4.52 a week ago, while Premium dropped to $4.77 from $4.80 a week ago. Diesel fuel average $5.03 a gallon, down from $5.04, while E85 slipped to $3.54 from $3.57 a week ago. But those prices are still stronger than those of a year ago, when regular fuel was $2.87 a gallon, mid-grade $3.21, Premium $3.48, Diesel $3.08 and E85 $2.43.
Fuel prices remain highest in the West and Northeast; the Midwest and South report are reporting lower prices, according to AAA.
Fueling higher prices
The minor slide in prices won’t come as much relief, and consumers shouldn’t expect to see a huge decline in fuel prices. Even though pump prices haven fallen below $4 a gallon in some parts of the South and Midwest, seasonal demand is picking back up as Summer approaches.
“As the days get longer, the weather gets warmer, and pump prices dip from their record highs, consumers feel more confident about hitting the road,” said Andrew Gross, AAA spokesperson. “But these lower pump prices could be temporary if the global price of oil increases due to constrained supply.”
Indeed, adding to pricing pressure is the war in Ukraine and fear of declining Russian oil production, which is keeping the price of crude above $100 a barrel. At mid-day Monday, crude was trading at $107.96 a barrel, up nearly 2 percent.
News that the European Union is drafting plans to ban Russian oil imports is adding upward momentum to prices, as global supply of crude oil would decline as a result. Additionally, the most recent Oil Market Report from the International Energy Agency confirms that Russian oil output will shrink by about 1.5 million barrels per day this month.
Meanwhile, total domestic gasoline stocks decreased 3.5 million barrels last week to 233.1 million barrels last week as gasoline demand increased to 8.73 million barrels per day from 8.5 million barrels per day, according to the Energy Information Administration. This is despite the fact that U.S. commercial crude oil inventories increased last week by 9.4 million barrels to 421.8 million barrels.
The least expensive markets
What does all this mean? In the end, where you live makes a difference in how much you pay at the pump.
The nation’s top 10 least expensive markets were Kansas ($3.66), Missouri ($3.66), Arkansas ($3.69), Georgia ($3.70), Oklahoma ($3.71), Texas ($3.71), South Carolina ($3.74), Mississippi ($3.77), Ohio ($3.77) and Iowa ($3.78).
The states that saw the largest decrease in price were Ohio (−7¢), Delaware (−7¢), Florida (−6¢), Indiana (−6¢), California (−5¢), Georgia (−5¢), Pennsylvania (−5¢), Kentucky (−4¢), Virginia (−4¢) and West Virginia (−4¢).
Given that the greatest concentration of refiners is located along the Gulf Coast from Alabama to Texas, it’s not surprising that those states have lower fuel costs.
What are we paying for?
The price you pay at the pump comes from four key factors.
The largest cost is the price of crude oil, which accounted for 53.6% of the cost of a gallon of gas in 2021, according to the U.S. Energy Information Administration. Taxes were the next biggest cost, accounting for 16.5% followed by distribution and marketing at 15.6% and refining costs and profits at 14.4 percent.
The federal tax on gasoline is 18.4 cents per gallon, significantly less than the 31.02 cents per gallon paid on average to state taxes and fees. Add on sales taxes along with taxes applied by local and municipal governments, and the price of fuel can vary significantly.
As of January 2021, California had the highest effective gas tax at 63 cents per gallon, according to Forbes. It was followed by Pennsylvania (59 cents), Illinois (52 cents), New Jersey (51 cents), and Nevada (51 cents). The states with the lowest gasoline tax are Alaska (14 cents), Missouri (17 cents), Mississippi (19 cents), New Mexico (19 cents) and Arizona (19 cents).
In response to escalating fuel prices, some states have suspended their gas tax, including Connecticut (through June 30), Georgia (March 18-May 31), and New York (June 1-Dec. 31). Other states are deciding whether to suspend the tax.