The price of gas in the U.S. continues to fall, with a regular gallon of gasoline averaging $3.90 on August 22, 2022, according to the American Automobile Association or AAA. The price of gas is down nearly 12 percent in the past month and 22 percent from the record high of $5.02 recorded on June 14.
So why are gas prices falling? One major reason is demand destruction. Prices have become so high that demand has fallen. A majority of Americans driving less this summer, according to a survey by AAA. The U.S. Energy Information Agency or EIA says that demand in July fell to levels not seen since the start of the COVID pandemic, though many observers are questioning the accuracy of these claims.
High gas prices are part of a broader challenge of inflation, which hit a 40-year high in the U.S. this June. And though a rise in gas prices impacts the overall cost of goods, their direct effects are unequal as gasoline prices vary from state to state.
The price of a gallon of regular gas in California is the highest in the country, averaging $5.32 today. And it’s lowest in Arkansas, coming in at $3.41. As the map shows, gas prices tend to fall into regional clusters. Gas is cheapest in the south and most expensive on the west coast.
Why California Gas Prices Are So High
High gas prices are one reason why you’ll see a lot of Teslas on road in California. And that’s by design. A major driver of why gas prices are higher in California is state taxes. In California, gas taxes are about fifty percent higher than the national average, according to the American Petroleum Institute.
Federal and state taxes, on average, make up around 17 percent of the cost of a gallon of regular gas at the pump, according to the U.S. Energy Information Agency.
California is a leader in environmental regulations. By making gas less affordable, the state aims to incentivize a transition toward hybrid and all-electric vehicles. But gas taxes are regressive. The driver of a used Corolla pays the same amount as the driver of a luxury vehicle (though the latter probably would need premium fuel). While public transportation is a great equalizing force, its availability is uneven across the state.
The cheapest gas in America can be found in Arkansas, where the price of regular gas averaged $3.41 on August 22. But when it comes to regions, the cheapest gasoline is in the Gulf Coast, where gas taxes are low and the greatest concentration U.S. refining capacity is located.
And so it’s no surprise that California has seen a population exodus due to the rising cost of living and states like Texas, where gas and the overall cost of living are comparatively cheaper.