The Overlooked Reason For High Gas Prices

With gasoline prices setting new records every day, the only place in the country where gas is still under $3 a gallon is New Jersey.

Oddly, it's one of only two states that require all its service stations to pump the gas for you.


New Jersey boasts the cheapest gasoline in the nation; it is also one of only two states that requires full service at every pump.
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"It shows you how little cost has to do with the price of gas," said Doug MacIntyre, senior oil and gasoline analyst at the Energy Information Administration. "This is local supply and demand conditions."

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While refinery outages continue to plague the Midwest - Chicago now has higher gasoline prices than notoriously pricey San Francisco - New Jersey is benefiting from its four in-state refineries, all of which appear to be running just fine.

Plus, New York Harbor gas facilities, which are actually in New Jersey, is the delivery area for all futures gasoline contracts traded on NYMEX. It's also the main port for gasoline imports from Europe, which account for 30 percent of the gas used in the Northeast.

Then there's the taxes. At just 14 cents a gallon, New Jersey has one of the smallest state gas taxes in the country. The national average is about 21 cents, according to gaspricewatch.com. The federal gas tax is 18.4 cents per gallon.

In Pennsylvania, which sits just next door to New Jersey and has several refineries of its own, the average price is $3.073 a gallon, according to the motorist organization AAA. That's about 13 cents higher than New Jersey's $2.947.

It's there if you look hard enough. Taxes.

Lots of taxes.

In an article that notes that New Jersey has the lowest average price for gasoline in the country, it takes until the sixth paragraph to note the taxes. The author of the story had to find a hook for the piece that no one else thought of, and succeeded in burying the real reason for why New Jersey has lower gas prices than elsewhere. The author thought it important to note the "connection" between low gas prices and the fact that the state prohibits self-service stations.

I use connection in quotes because there is no connection there. One has nothing to do with the other. The price of gasoline is tied to a combination of wholesale prices in the market plus taxes and supply and demand.

States and the federal government tack on all manner of taxes such that when they speak of windfall taxes, they should look at their coffers every time the gas prices spike because their revenues increase, especially when the taxes are a percentage of the price as opposed to a set dollar figure. New Jersey imposes the lowest taxes in the country, and New Jersey drivers benefit from the lower prices.