When a trucking company does business, they want to make sure that business is as cost-effective as possible. There are already many expenses to deal with, such as purchasing and maintaining vehicles, paying drivers, and operating facilities. Another big expense is fuel, and that cost can play a role in the success or failure of a trucking company. For companies that are only operating intra-state vehicles, locating their operations in a state where fuel prices are low may help to save them a lot of money in the long run. But many companies operate interstate lines, so their vehicles must be fueled where they are located at the time.
Even for these kinds of companies, though, there are options to consider. Sometimes, just driving a few extra miles to get into another state will mean a significant difference in the fuel price. Because of that, careful planning can mean big savings for a trucking company. That’s especially true if the company has specific routes their drivers generally use. The mileage can be studied and considered, in order to determine whether drivers should be able to get into an adjoining state to fuel their trucks and save money for the company. That may not work all the time, but even some of the time can make a difference.
Why Fuel Prices Vary Around the Country
The idea that fuel prices — both gasoline and diesel — vary from state to state is not a new concept, but it is one that people often wonder about. Driving a few miles into a neighboring state could save several cents per gallon. For large trucks with large fuel tanks, even 10 or 20 cents per gallon can really add up over a number of trips in a month or a year. There are a lot of things that affect fuel prices, with one of the biggest factors being taxes. There are federal taxes on fuel, but then there are also state taxes. When a state has higher fuel taxes, stations in that state need to charge more for the fuel they sell to consumers.
Oil prices, emissions standards, and other issues also come into play in every state. Even the distance the fuel has to go in order to be delivered to the station can affect the price. For stations right off the interstate, and for stations close to refineries, the gas prices are generally lower. But even with that being the case, there can be a significant difference from one state to another. For example, California has a diesel fuel tax of more than 106 cents per gallon. Alaska only charges a state tax of 36.7 cents per gallon of diesel fuel. There are other factors, but taxes are generally the largest reason for different fuel prices by state.
Another reason that fuel prices are different based on the state is emissions standards. There are over 50 fuel grades created at refineries, to ensure that state and city standards are met where the fuel is sold. With so many options out there, refineries have to work harder to make sure they have availability and meet requirements. The need to produce a higher number of fuel grades raises prices because it’s more expensive for refineries to do this. One city with very strict fuel standards is Chicago, and it frequently ranks as one of the most expensive cities for gasoline and diesel fuel purchases, as well.
The price of crude oil is yet another factor because transporting that oil to a refinery and the fuel from the refinery to the station where it will be sold can be difficult, from a logistical point of view. The Northeast and the West Coast typically see higher fuel prices, because more of their oil is imported. In states like Texas and North Dakota, where there’s easy access to oil and refineries, the cost of fuel is generally lower. The number of working pipelines and where they’re located throughout the country are parts of that issue, too, because states that can get easier access to crude oil are states with lower fuel prices.
The Most Expensive and Least Expensive States for Fuel
For any trucking company considering where to base its operations, or for those that want to plan routes that could save them some money, it’s important to know which states are least expensive and most expensive for fuel prices. Typically, the West Coast is going to be the area of the country where gas and diesel fuel cost the most. Additionally, the Northeast sees high prices. But state by state, the most expensive and least expensive gas prices can vary. As of December of 2019, the state with the highest fuel price is Hawaii, at $3.66 per gallon for unleaded gasoline, and the lowest priced state is Delaware at $2.34 per gallon.
Significant Factors Affecting Gas Prices
The biggest factor that affects gas prices — including the price of diesel fuel — is simple: supply and demand. When many more people are traveling, such as in the summer months and around holiday times, the demand for fuel is higher. During those times, gas prices will be higher all over the country. If a state’s prices are generally higher, that state will continue to have higher prices. Lower-priced states will see an increase, but their prices will still be lower than the prices in other states. In other words, supply and demand affect prices all over the country, not just in one state.
Looking at how fuel prices are affected on a state-by-state basis and as a more general issue around the country both matters. Trucking companies need a good understanding of fuel prices since fuel is such a large part of their expenses. By having a good understanding of the reasons that prices fluctuate, trucking companies can focus on how to lower that part of their expenses and save themselves some money. Doing so can make a big difference in a company’s bottom line, and that savings can be passed on to customers or used to expand the company and do even more in the future. Fuel prices matter, in a big way.