Why do gas prices rise and fall? 5 driving factors

Why do gasoline prices go up and down so much across the US, and what causes the changes? Here are five key factors that influence gas prices:

4. Geography matters – just ask Hawaii

Mike Blake/Reuters/File
A sign displays the price of gas in the town of Paia, in Maui, Hawaii in April 2011. Gas prices tend to be higher in remote Hawaii than in the rest of the US.

Gas prices vary widely based on where you are in the US. In remote Hawaii, where it’s costly to ship products, gas prices were above $4 a gallon in October – even as the US average flirted with the $3 mark.

But proximity to refineries isn’t the only reason locations matters, according to Green. “The biggest determinant of gas prices in individual states is the tax they have on fuel,” he says.

Varied tax rates mean gas in South Carolina – which taxes only 35.15 cents a gallon – is significantly cheaper than gas in North Carolina, which taxes 55.15 cents a gallon, according to information compiled by the American Petroleum Institute, an industry group. And those tax differences are passed along to consumers: Gas in South Carolina was $2.76 a gallon on October 30, while it sold for $2.93 in higher-taxing North Carolina, according to data from GasBuddy.com, a website that collects gas prices nationwide.

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