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Business, Energy

How Much Are You Paying In Taxes At The Pump?

Today’s price check on GasBuddy.com shows that the average cost of a gallon of regular gasoline is $2.415 – an increase of $0.155 from one month ago. However, since March 1st, the prices have declined in a number of markets across the U.S.

While most of us pay a lot of attention to the overall cost of gasoline or diesel fuel at the pump, we pay less attention to the taxes that are included in the per gallon price. Until now, some of you may be unaware that taxes are included in the price structure. Like gas prices, the amount of taxes you pay depends on where you live.

According to the figure provided by the American Petroleum Institute (API), there are four cost components that factor in the price that motorists pay at the pump: crude oil, refining, distribution and marketing, and taxes. 

gasoline-taxes.gifWhere did these taxes come from? They have been around for a very long time. Federal and state excise taxes make up most of the costs here, however, depending on where you live, some jurisdictions also include local and sales taxes.

The federal excise tax for gasoline is $0.1840 per gallon and $0.2440 for diesel. The bulk of funds collected under this tax are used for building and repairing roads and bridges. The federal excise tax has been in the news recently as a few members of Congress and other organizations are asking if it should be raised given the condition of the U.S.’s aging infrastructure of bridges and roadways?

Each state tacks on an excise tax as well. The American Petroleum Institute reports that the average state excise tax included in the cost of gasoline is $0.2064. [Ref 1] In addition to state excise taxes, there are other state taxes that are also added. The average of other state taxes is $0.0919. That brings the average of all taxes paid for gasoline to $0.4823 per gallon in the U.S. The average of all taxes paid on a gallon of diesel fuel is $0.5438.

Other costs included in the price at the pump are transportation and retail costs. It goes without saying that these prices vary based on the location and distribution channels. As an example, I usually expect to pay 10 to 20 ¢ more per gallon for gasoline in Flagstaff than Phoenix. Why? Because of the additional cost required to transport these fuels two hours away and over an increased elevation of 4,000 feet.

Prices at the pump will continue to fluctuate for both gasoline and diesel fuel as U.S. oil refineries switch from winter to summer blends. In addition to these activities, the New York Times reported on Monday, March 16, 2015, that the price of West Texas Intermediate crude, the main United States benchmark, fell about 2 percent to about $44 a barrel, a six-year low, while Brent crude, the international benchmark, fell by about 2 percent to about $53 a barrel.

OPEC has not given any indication that they are going to make a move to reduce their production. This is tied to their continued strategy of putting economic pressure on U.S. drillers that are producing oil and natural gas via the fracking process. Given the economic forces at play during the first quarter (Q1) of 2015, it will be interested to see what impact they will have on gas prices in Q2.


  1. State Motor Fuel Taxes, American Petroleum Institute, http://www.api.org/~/media/files/statistics/statemotorfuel-onepagers-jan-2015.pdf, Revised 02.12.201 

About Vi Brown

Vi is principal and CEO of Prophecy Consulting Group, LLC, an Arizona firm that provides business and engineering services to private and public clients. Prior to establishing her consulting practice in 2001, Vi worked with Motorola, Maricopa County Government, Pacific Gas & Electric, CH2M Hill, and Procter & Gamble. As an adjunct faculty member, Vi teaches undergraduate calculus classes and graduate level environmental courses. She is also a professional speaker.


One thought on “How Much Are You Paying In Taxes At The Pump?

  1. Thanks for the information. I didn’t know that the individual states added on their own gasoline tax on top of the federal government tax. There are so many factors that contribute to diesel gas prices. Is it worth the drive to fill up my tank in a bigger city so as to avoid the additional cost required to transport the fuels?


    Posted by Rhys Rawson | July 1, 2015, 6:26 am

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