Gas Prices Inch Down for Second Straight Week

Gas Prices by State

According to GasBuddy, regional price disparities have widened significantly, leaving a $2.23 gap between the nation’s highest and lowest averages. California currently holds the highest average for regular gas at $6.08, while Indiana offers the cheapest at $3.85. While nearly every state in the nation is now averaging over $4.00 per gallon, a clear geographic divide has emerged.

The West Coast continues to lead the nation in fuel costs, though the ceiling has moved higher. California now stands alone as the only state with an average surpassing the $6.00 mark. The remainder of the West Coast (Alaska, Nevada, Oregon, Hawaii, and Washington) all maintain averages between $5.00 and $6.00.

The most dramatic shift is seen in the middle tier; there are now 38 states across the West, Northeast, and Midwest falling into the $4.00 to $5.00 range, signaling a broad national increase. Conversely, the number of states with relatively lower prices has dwindled significantly. Only three states (Indiana, Oklahoma, Georgia, Mississippi, Texas, and Louisiana) remain below the $4.00 threshold, with these lowest averages concentrated mainly in the South.

Behind the Price: Components and Inflation

To understand these surges, it is helpful to look at the "price at the pump" as a sum of its parts. The retail price of gas is made up of four main components: 1) cost of crude oil, 2) refining costs and profits 3) distribution and marketing costs and profits, and 4) taxes.

The volatility in these components, particularly crude oil, has been clearly reflected in recent years in both the Consumer Price Index (CPI) and Personal Consumption Expenditures (PCE). In the following chart, we take a look at gasoline prices adjusted for inflation to show the "real" cost to consumers.

For an easier way to visualize these effects, this next chart overlays the nominal price with the inflation-adjusted "real" price for both regular and premium gasoline.

For additional perspective on how energy prices are factored into the CPI, see Inside the Consumer Price Index.

Crude Oil Market

This next chart shows the West Texas light crude oil price over the past 8 months. As of May 26th, WTIC end-of-day spot price for crude oil closed at $93.89, a 10.0% decline from the previous week.

The final chart provides a monthly overlay of West Texas light crude, Brent crude, and unleaded gasoline end-of-day spot prices, showing the tight correlation between global benchmarks and domestic retail costs.

ETFs associated with gasoline WTIC crude oil, and Brent crude oil include: United States Gasoline Fund LP (UGA), United States Oil Fund LP (USO), United States Brent Oil Fund LP (BNO), and Invesco DB Oil Fund (DBO).

Read more updates by Jen Nash