Gas prices are a key economic indicator for millions given that 91.7% of American households own one or more vehicles, many of which need to be filled with gasoline regularly. So the news that gas prices have edged down nationally is providing a bit of welcome relief as families and individuals plan their summer vacations.
Of course, gas prices are a complex calculation, and some states have lower prices than others. Here’s why—and where costs are lower.
Why are gas prices going down?
In its latest report on gas prices, AAA cites lower demand and increased supply as the primary reasons for slightly lower gas prices. This has led to a national average of $3.50 per gallon in late June, a 9-cent decrease from earlier in the year and a 6-cent decrease from a year ago.
Slower demand
In the past, June was a month when families hit the road as the weather heated up and schools began their summer breaks. However, summer demand has been lower since the COVID-19 pandemic. We see this in Energy Information Administration (EIA) data, which shows the U.S. gas supply was over 9.7 million barrels per day in June 2019. The months of June in the two prior years saw similar supply numbers.
Fast-forward to June 2024, and the demand is 9.2 million barrels per day. Demand is inching closer to its pre-COVID numbers but has not fully recovered.
Strengthening domestic supply
Total domestic gasoline stocks have risen, putting downward pressure on prices. For instance, domestic gasoline stocks were 219.5 million in the last week of June 2023. In the last week of June 2024, that figure was 231.7 million.
Gasoline stocks are important because they create a cushion between short-term supply and demand imbalances. In other words, the larger the stock, the less chance that supply won’t be able to keep up with demand. When stocks are low, prices tend to increase. But when stocks are high, gas prices are more likely to decrease.
Which state has the highest gas prices?
Gas prices vary significantly by state. According to the most recent data from AAA, the states with the highest gas prices for regular gasoline are California ($4.79), Hawaii ($4.70), and Washington ($4.29).
The prices for mid-grade in those states are $5.00, $4.90, and $4.55, respectively. Premium gasoline prices are $5.18, $5.16, and $4.77.
Which state has the lowest gas prices?
At the high end of the price spectrum, the same states top the list regardless of the grade of gas. However, there is more variability at the bottom. For regular gas, the lowest prices are in Mississippi ($2.99), Louisiana ($3.07), and Arkansas ($3.08).
The lowest prices for mid-grade gas are in Mississippi ($3.40), Kansas ($3.42), Oklahoma ($3.44) and South Dakota ($3.44). The lowest prices for premium gas are in Kansas ($3.72), Oklahoma ($3.72), and Missouri ($3.76).