In this article, we are going to discuss the 20 states with the cheapest gas prices in the US. You can skip our detailed analysis of the global oil and gas market, the reason why gas is so cheap in the U.S., the total refining capacity of the United States, and the transition to biorefineries, and go directly to 5 States With the Cheapest Gas Prices in the US.
America is the Largest Oil Producer in the World, accounting for 14.7% of the overall world crude production in 2022. Having the luxury of local production means that oil and gas are readily accessible and affordable for mass distribution. While this may not seem like it directly impacts the average oil and gas consumer, the truth is that it does in a massive way. Every year, the indigenous production of oil and gas helps save American consumers an estimated $203 billion, or $2,500 for each family of four. Moreover, the oil and gas industry also supports over 12 million American jobs, provides billions of dollars in tax revenue, and ensures energy security.
Global Oil and Gas Market:
As we mentioned in our article – 20 States With the Highest Gas Prices in the US – the global oil and gas market was valued at $6.99 trillion in 2022, and is expected to grow to $8.67 trillion by 2027, with a CAGR of 4.4% during the forecast period. The largest region in the global oil and gas market share is Asia Pacific, with North America coming in second.
The primary factors driving the growth of the industry include the rising demand for oil and gas, growing competition in the industry, financial capital, and public scrutiny. Furthermore, the rising oil and gas exploration activities and the increase in prices globally are also anticipated to drive the industry's growth.
Why Gas is so Cheap in the U.S.:
As a general rule, richer countries have higher gas prices, while the prices in poorer countries or countries that produce and export oil are significantly lower. However, the U.S. is an exception to this rule and has surprisingly low gas prices, despite being among the Richest Countries in the World. The principal reason behind this, other than the massive indigenous oil production in the country, is that gas taxes have always been exceptionally low in America. The federal gas tax was first charged in 1932 at 1 cent per gallon and is now at 18.4 cents a gallon, but this tax has remained unchanged since 1993.
1 liter of gas in USA had an average price of $0.93 (or $3.535 a gallon) on the 27th of November 2023.
Total Refining Capacity of the United States:
With a total oil refining capacity of 18.3 million barrels per day (bpd), the United States is the Country with the Largest Refining Capacity in the World. As of January 2023, there were 129 operable refineries in the country, down from 130 at the beginning of the last year. This reduction is due to the closure of a small plant in Santa Maria, CA, which had a crude oil distillation capacity of 9,500 bpd. However, despite this closure, the total U.S. capacity witnessed a YoY increase because PBF Energy reactivated a previously retired crude oil distillation unit at its refinery in Paulsboro, NJ.
But the major reason why the total U.S. refining capacity has gone up this year is the successful startup of the Beaumont Refinery Project by The Exxon Mobil Corporation (NYSE:XOM), which has added 250,000 bpd of capacity to one of the largest refining and petrochemical complexes along the U.S. Gulf Coast. Completed in March, the $2 billion project is the largest refinery expansion in the country since 2012 and will help meet the growing demand for affordable, reliable energy. The added volume in Beaumont increased its total processing capacity to more than 630,000 bpd, making it one of the largest refineries in the United States.
The Exxon Mobil Corporation (NYSE:XOM)’s integrated operations in Beaumont also include chemicals, lubricants, and polyethylene plants. The oil major has approximately 2,100 employees in the area, with its operations accounting for approximately 1 in every 7 jobs in the region.
The Exxon Mobil Corporation (NYSE:XOM) ranks among the 15 Best Income Stocks to Invest In.
Transition to Biorefineries:
Biorefineries are processing facilities that convert biomass into energy and value-added products, like biofuels, biochemicals etc. The increasing pressure to decarbonize has incentivized several oil refineries to repurpose their refiners to ‘stand-alone biorefineries’, that produce lower carbon intensive biofuels.
A great example of this is Shell plc (NYSE:SHEL)’s plan to transform its former Convent refinery in Louisiana into a renewable fuels and lower carbon products complex. The oil giant announced last year that it would build a $1.48 billion low-carbon fuels facility at the site after it shut down the refinery in 2021, as part of its efforts to reduce carbon emissions. It is estimated that construction would start in February 2025 and finish by March 2028.
The plan to repurpose Convent is the first in a series of projects Shell plc (NYSE:SHEL) is considering at its facilities along the Gulf Coast to accelerate the transition from fossil fuels. The regional spending plan, which is still in flux, could cost as much as $10 billion.
Shell plc (NYSE:SHEL) is counted among the Most Valuable Gas Companies in the World.
With that said, here are the States with the Cheapest Gas in America.
To collect data for this article, we have referred to AAA, looking for the states with the lowest gas prices. We have also referred to the Energy Information Administration to collect information about the crude oil and gas reserves in several states. The following states have been ranked by their gas prices as of November 29th 2023.
If you also want to check out which countries have the least expensive gas, here are the 20 Countries with the Cheapest Gas Prices.
Price of Gas per Gallon: $3.074
Gas prices have recently fallen on the momentum created by the seasonal downturn in fuel demand, coupled with stronger gasoline supplies and the switch to cheaper winter-blend gasoline.
Indiana's Whiting refinery can process about 435,000 barrels of crude oil per calendar day and is the largest inland oil refinery in the nation.
Price of Gas per Gallon: $3.062
Minnesota does not produce any crude oil of its own and around 80% of the state’s oil comes from the Canadian tar sands. Crude from Canada flows through pipelines, stopping at two refineries in the state. The Pine Bend Refinery in St. Paul Park produces 70% of Minnesota's gasoline.
Last year, several gas stations in Hastings, MN, were selling their gas for nearly $1 cheaper than the national average of about $4.50, thanks to an apparent price war between gas stations in the city.
Price of Gas per Gallon: $3.049
Although Nebraska is better known for its crops and livestock, the state is also home to modest petroleum reserves equal to less than 0.1% of the nation’s total. The Cornhusker State does not have any refineries of its own, but there are pipelines that cross Nebraska and deliver crude oil to facilities in its neighboring states.
Price of Gas per Gallon: $3.048
Colorado was the fifth-largest crude oil producing state in America in 2022 and accounted for almost 4% of the total U.S. crude oil output. It was announced earlier this year that the Denver-based PDC Energy has been acquired by the Chevron Corporation (NYSE:CVX), creating the largest oil and gas company in the Centennial State. The new company will now hold 600,000 acres statewide and produce 400,000 barrels of oil per day on average, making it one of Chevron Corporation (NYSE:CVX)’s top five production units in the world. The California-based oil giant is also looking to expand its renewable fuel business in Colorado to include hydrogen, geothermal, and carbon sequestration.
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16. North Carolina
Price of Gas per Gallon: $3.04
North Carolina does not produce any crude oil of its own and gets most of its gas through the Colonial Pipeline, which starts in Houston, TX, and carries gasoline to the New York Harbor. There was a severe gas shortage in the Tar Heel State in 2021 after the Colonial Pipeline was temporarily shut down due to a ransomware attack, thus exposing a critical vulnerability in how both crude oil and refined petroleum makes its way across the country and to gas stations.
North Carolina ranks among the States with the Least Expensive Gas.
Price of Gas per Gallon: $2.97
Ohio is counted among the major oil producing states in the U.S., with the Buckeye State also having given birth to companies like Standard Oil and Marathon oil in the 19th century. Although conventional motor gasoline can be sold throughout Ohio, most retail gas stations in the state sell gasoline blended with at least 10% ethanol.
Price of Gas per Gallon: $2.964
Kentucky accounts for less than 0.1% of the total proved crude oil reserves and production in America, and the Bluegrass State produced nearly 2.3 million barrels in 2022. Kentucky is also home to the Catlettsburg refinery in the northeast, which has a total crude oil refining capacity of 291,000 bpd.
Price of Gas per Gallon: $2.945
Wisconsin does not have any oil production of its own and gets most of its refined petroleum products from refineries in the Chicago and Minneapolis metropolitan areas. The Badger State also has a small oil refinery which was shut down for five years following a massive explosion in 2018 that injured dozens of workers and forced people to evacuate. However, the Superior Refinery resumed operations again this year after a $1.2 billion effort to rebuild the facility.
Wisconsin is placed among the States with the Cheapest Gas in America.
Price of Gas per Gallon: $2.923
Although the Volunteer State has an oil refinery in Memphis, capable of processing 180,000 barrels of crude per day, the traditional Nashville supply comes from Gulf Coast refiners via the Colonial Pipeline. Tennessee also unveiled a new $60 million fuel terminal last year, with the capacity for roughly 100 truckloads per day of diesel and gasoline of all grades.
The South, in general, tends to have cheaper gas because its states are closer to refineries in the Gulf of Mexico, and taxes are also typically lower.
11. South Carolina
Price of Gas per Gallon: $2.922
Since there is no oil production or petroleum refineries in South Carolina, all petroleum products arrive from out of state via pipelines from the Gulf and through the Port of Charleston. In 2017, the South Carolina General Assembly passed legislation to increase the state gas tax by 12 cents, phasing in an increase of 2 cents per year for six years. These funds are deposited into a trust fund called the Infrastructure Maintenance Trust Fund.
Price of Gas per Gallon: $2.914
Gas prices in Iowa are usually lower than the national average due to the strong retail competition that reduces profit margins. Moreover, eight gas stations in mostly rural communities of the Hawkeye State have also begun selling E15 gasoline — which has a 15% ethanol blend — and is offered at 5 to 15 cents per gallon less than other types of gasoline.
Iowa sits among the Top 10 States with the Lowest Gas Prices.
Price of Gas per Gallon: $2.913
The petroleum industry is a major contributor to the economy of Kansas and the Sunflower State produced nearly 28 million barrels of oil in 2021. A network of pipelines delivers crude oil to the state's three refineries, which combined can process about 390,000 barrels of crude oil per day.
Price of Gas per Gallon: $2.877
A major reason why gas prices are lower in Alabama is its close proximity to the large refineries in the Gulf Coast, so the transportation costs of bringing gasoline to the retailers is lower. Many of the Yellowhammer State’s southwestern counties also have a great deal of oil production, and Alabama’s three petroleum refineries have a combined capacity to process about 141,000 barrels of crude per day.
Alabama is counted among the States with the Cheapest Gas in 2023.
Price of Gas per Gallon: $2.836
Arkansas produces about 0.1% of the nation's total crude oil output and the state’s two oil refineries have a combined processing capacity of almost 91,000 barrels of crude per day. Arkansas collected more than $572 million in gas tax during fiscal year 2021, which was used to support the Arkansas Department of Transportation, road construction, and repair.
Price of Gas per Gallon: $2.824
At 17.5 cents per gallon, Missouri has the second-lowest state gas tax in America. The state has very small crude oil production of its own and no oil refineries, but because of its proximity to Texas, Oklahoma, and the Gulf Coast states, Missouri is crisscrossed by some of the nation’s largest pipelines. Some petroleum products also arrive at the state's inland ports by barge on the Missouri and Mississippi Rivers.
Missouri ranks 6th in our list of States with the Cheapest Gas.
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Disclosure: None. 20 States With the Cheapest Gas Prices in the US is originally published on Insider Monkey.