Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Chevron Corporation (CVX), BP plc (ADR) (BP): How Much Are You Taxed at the Pump?

Chevron Corporation (NYSE:CVX)As the summer driving season approaches, gas prices are back approaching their recent highs of February, and averaging $3.66 a gallon across the U.S. But who’s to blame?

Is it the oil companies?

Or perhaps government subsidies are somehow to blame?

Or is it Iran, and its vow to ratchet up oil prices to $100 a barrel, and stick them there?

One thing’s for certain. Two factors working to keep the price of gas high are your own state and federal representatives. Between federal gasoline taxes of $0.18 per gallon, and state taxes that average $0.25 per gallon, Congress and your local version of it are directly responsible for about $0.43 out of every $3.66 you pay at the pump — 11% of the retail price.

And that’s just the average. Depending on where you live, the taxes can be lower …

State Gas Tax Per Gallon
Georgia $0.08
Alaska $0.08
New Jersey $0.11
Wyoming $0.14
Missouri $0.17
Oklahoma $0.17
South Carolina $0.17
Mississippi $0.18
Virginia $0.18
Alabama $0.19
New Mexico $0.19

… or quite a bit higher:

State Gas Tax Per Gallon
Minnesota $0.29
Kentucky $0.30
Oregon $0.30
Maine $0.31
Pennsylvania $0.32
Rhode Island $0.33
Wisconsin $0.33
West Virginia $0.35
Washington State $0.38
North Carolina $0.38
California $0.38

Of course, drivers in California can take comfort in knowing that, even if they’re paying nearly five times the gas taxes of their fellow citizens in Georgia, at least their roads are five times less congested, right? Right?

“All politics are local.” So are many taxes and regulations
Now, high state gasoline taxes are only part of the reason why states such as California and Hawaii, for example, have acquired a reputation for super-premium gas prices. In Hawaii’s case, high gas prices come with the territory — specifically, territory that’s stuck on a bunch of islands, far removed from regular U.S. pipeline routes.

In California’s case, environmental regulators have mandated the use of a specific gasoline blend aimed at cutting smog. The small-batch production of this gasoline blend doesn’t lend itself to efficiencies of scale as well as more plebeian blends do. Complicating matters further, the limited number of companies who do produce it have a certain amount of pricing power, owing to the lack of competition in production. In California, just five companies — Chevron Corporation (NYSE:CVX), Shell, BP plc (ADR) (NYSE:BP), Valero Energy Corporation (NYSE:VLO), and ConocoPhillips (NYSE:COP) — own more than 70% of the market for this superfuel.

Still, taxes are definitely a key factor in keeping gas prices high — and they’re getting more important by the day.

Follow the money
See if you can track the legislative logic here.

We all know that high gas prices lead to less gasoline usage. That’s just Economics 101, and borne out by the facts. Over the past seven years, America’s oil consumption (two-thirds of which goes to gasoline) has fallen by 9%. Part of that’s due to higher fuel efficiency in gas-burning cars, part to more use of electric cars; but a large part is simple price disincentivization to buy and burn gas.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.