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In Which States Are Gasoline Prices Falling Fastest?

This article is more than 9 years old.

Thanks to falling oil prices, America's motorists are enjoying gasoline prices about 20 cents per gallon cheaper than this time last year. The big move has come since July, with prices down about 15% nationwide -- or nearly 50 cents -- to an average $3.14 a gallon, according to data from Gasbuddy.com (find your state on our map below). Naturally, this has a stimulus effect on the U.S. economy -- saving us about $100 billion in annualized fuel costs, according to economist Ed Yardeni. That works out to about $300 in annual fuel savings for every American. Just in time for the holiday season.

The price of gas has fallen fastest in Missouri, down 18% to $2.77 a gallon -- which is also the cheapest gas in the nation. On the flipside is Hawaii, which suffers the most expensive gasoline at $4.07 a gallon, and has also seen the smallest decrease in price during that time, just 6%.

Graphic by Frank Bi, Forbes.

Even when observed over such a short period of time, that relative price elasticity makes sense. Hawaii has expensive gasoline because the nearest oil fields are half an ocean away and it has just two little refineries (one of which could soon be mothballed). Hawaii's gas price has those higher transport costs built in -- costs that don't change as quickly as oil prices do. And with less competition among suppliers, there's little reason for wholesalers or filling stations to lower prices. The other states with the least price reductions are almost as remote: Alaska, Montana (both down 9%) and Wyoming (less than 8%).

Missouri motorists benefit from being located at the geographic center of the Lower 48, which makes it a transportation hub and rife for competition among the petroleum products pipelines that cross the state, as well as the barges full of fuel that ply the Mississippi and Missouri rivers. Being inundated with petroleum supplies from nearby refineries helped speed price cuts in Texas (down 15%) and New Mexico (16%) as well.

Taxes also play a significant role in how fast a state's gasoline price rises or falls. When taxes make up a smaller portion of the gasoline price, you'll naturally see that price move more to reflect changes in underlying oil prices. Missouri also has one of the lowest state gasoline taxes, at 17.3 cents per gallon. Add that to the 18.4 cent federal tax, and taxes make up an overall 35.7 cents per gallon. Hawaii has one of the highest gas taxes, for a total of 66.29 cents per gallon.

Those relative differences in gas taxes and infrastructure helps explain why New Jersey shows up green on this map, while neighboring New York is light purple. New Jersey has lots of refineries and petrochemical plants, so there's plenty of supply into that market. And New Jersey also enjoys the second-lowest combined gasoline tax (after Alaska) at 32.9 cents per gallon. Compare that with New York, which has the biggest tax burden at 68.5 cents per gallon. As a result, New Jersey gas prices are down 16.5%, while New York is only off 11%.

Americans currently spend about 5% of disposable income on energy, which is below the 5.5% average since 1960 -- thanks in large part to more fuel efficient cars. Will that trend revert to mean? It very well could if Americans take lower gas prices as their cue to forego buying a hybrid or all-electric vehicle and instead opt for more pickup trucks, Hemi-laden muscle cars and SUVs.

This week Ford further slashed the sticker price of its battery-powered Focus Electric by $6,000 to $30,000 because nobody's buying them. That's in addition to a $4,000 cut earlier this year. After federal and state tax credits, you could have the car for about $20,000. Automakers are selling only about 10,000 plug-in vehicles per month, and about 40,000 gas-electric hybrids. That's a blip out of about 1.5 million total monthly vehicle sales.

Tom Kloza of Gasbuddy.com foresees America's average gasoline price dropping below $3 a gallon within a week. If  prices fall much more, we could see yet another stall out in the electric car revolution. Not that they buy many of those in Missouri anyway.

Graphic by Frank Bi, Forbes.

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