Why Gas Prices Vary Station to Station

Gas prices often differ because of three broad factors: taxes, fuel blends and margins.

February 28, 2024  read

In mid-February 2024, gas prices averaged $3.28 per gallon, according to AAA. However, in the Continental United States, prices varied by nearly $2 per gallon between the state with the lowest price, which was Wyoming at $2.82 per gallon, and most expensive state, which was Washington at $4.65 per gallon.

Why the price disparity? It boils down to three broad factors: taxes, fuel blends and margins. 


Taxes play a role in price variations by state. All retailers must assess the 18.4-cent federal gas excise tax and states also have additional excise taxes and fees on gasoline. As of July 2023, these combined taxes averaged 50.7 cents per gallon, ranging from a high of 86.5 cents in California to a low of 27.4 cents in Alaska, according to the U.S. Energy Information Administration.

Fuel Blends

California requires unique fuel blends that are not required elsewhere in the United States, making the state susceptible to supply outages. In 2015, refineries in California faced massive issues like outages and fires that disrupted production. Fuel cannot be easily supplied to California from nearby states because they have different fuel specifications, and pipelines cannot supply new fuel to the state when there are shortages. Fuel must be brought in from barges, which adds to the delivery timeline.  When fuel shortages occur, gas prices can often spike by 50 cents or more until product is resupplied.

Another factor for higher gas prices in California is the complexity of the state’s fuel blend, which is costly to produce and adds an additional few cents to the price consumers pay at the pump.

Areas like Atlanta felt similar pressure in September 2016, with a major disruption to the Colonial Pipeline. With limited options beside pipelines to provide regional fuels, the area experienced short-term price spikes until supply increased, partially because waivers allowed other non-compliant fuels to enter the market.

In 2017, supply and distribution problems transpired with Hurricanes Harvey and Irma, creating wholesale price disparities based on product availability and proximity to pipelines, among other factors.


The profit margin on a gallon of gas can vary widely depending on where the store is located, nearby competition from other business and fuel retailers, and the brand of fuel sold. In general, the average profit margin on a gallon of gas is about 10 cents. 

In the U.S., gas sales at convenience stores account for 53% of revenue dollars but only 42% of profit dollars. In other words, gas sales drive customer traffic but in-store sales drive the business—and increasingly in-store sales are generated by prepared food sales.

Additional Factors

Similar factors that affect retailers in California can also play a role in gas price disparities in local markets. Taxes may be higher in one part of town, or there may be different requirements for specific fuel blends. However, gas prices can vary because of different wholesale costs or business strategies:

  • Wholesale costs, which may vary by 10 cents to 20 cents per gallons. Retailers don’t necessarily pay the same wholesale prices due to these four factors:
    1. Volume: Retailers that sell more fuel often enjoy a better wholesale price.
    2. Brand: Fuel that carries the name of a major refinery tends to cost more because the company is also providing other valuable services to the business, whether proprietary market intelligence or marketing support, or in providing a recognized brand of fuel.
    3. Competition: In some areas, a branded retail operator may receive a price discount so the brand is more competitive in that market.
    4. Real estate: The cost to acquire real estate is typically higher on sought-after convenient corners.
  • Business strategies of a retail location often account for factors like in-store traffic. For example, a store near an airport often experiences strong gas sales compared to in-store sales. Seasonality can also play a role, such as vacation areas where store traffic is high for several months during peak travel and weak during the off season.