Why Is Gas Cheaper In Oklahoma?

Monday, May 7th 2012, 3:42 pm
By: News 9

When gasoline prices are on the way up -- as they have been for much of the last three and a half years -- it never seems unfair to complain about them.

A spokesman for Tulsa-based QuikTrip, one of the top retailers of gasoline in the country, calls gasoline "the most emotional commodity" sold in the U.S., because the price is advertised on large signs 24 hours a day, seven days a week.

In Oklahoma, however, emotional rants about gas prices should perhaps be tempered by the fact that we tend to pay less per gallon than in almost any other state in the country. It's not uncommon, on a given day, for Tulsa and Oklahoma City to rank 1 and 2 for cheapest fuel prices in the nation's metropolitan areas.

Why is this?

After talking with several industry experts, I have put together this simplified explanation for Oklahoma's relatively low prices at the pump:

1. Taxes. The factor that is, perhaps, the simplest and easiest to understand is the fact that fuel taxes in Oklahoma are lower than in most states. Combined state and federal excise taxes and fees in Oklahoma are 35.4 cents, 5th lowest in the country. Alaska is lowest at 26.4 cents, while New York is highest at 67.4 cents.

2. Proximity to Pricing Groups. Oklahoma sits at the end of two fuel "pricing groups." The Gulf Coast Group moves gasoline north from refineries on the Gulf of Mexico, while Group 3 moves product south from Illinois, Missouri and Kansas. With Oklahoma situated at the end of the line for both of these groups, distributors here are sometimes able to get a discounted price for gasoline that is 'left over,' since the owners want to get rid of it and clear the line for additional product they have in the pipeline.

3. Boutique Fuels. In the summer months, many cities/states are required to sell special blends of gasoline in order reduce harmful emissions. Oklahoma is virtually surrounded by such cities with these special fuel requirements. The result is that sometimes gasoline producers are left with too much 'conventional' gas, and so they will drop the price to try and sell it in markets without special fuel requirements. Oklahoma City is almost always able to buy that cheaper, non-boutique fuel, and Tulsa frequently can, as well.

4. Central Location. Again, Oklahoma's geographical location -- in the center of the country -- helps us keep fuel costs down. As fuel is moved across the country from refineries to terminals, Oklahoma is often the beneficiary of cheaper fuel, because there is only so much space in the pipelines to ship product. If an owner of fuel doesn't sell as much as they expected, they will have extra fuel in the pipeline and won't be able to ship additional product until they sell what's already in the line. In an attempt to "empty their position" within the pipeline, they will sell the product as quickly as possible at the closest spot available. Oftentimes, Oklahoma is just that spot.

5. Competition. According to AAA Oklahoma, the Sooner state has more gasoline retail locations per capita than any other state in the nation. It's hard for a retailer to sell gasoline at an inflated price when the competitor on the opposite corner sees an opportunity to sell it for less.

See a history of gasoline and other prices