Friday, March 16, 2012

Local Variation In Gas Prices

Gas prices contribute a lot to inflation. But, they change a lot from place to place.

It is true that average gas prices contribute to inflation.

But, high gas prices do not. The reason for this is that there’s about a ± 20% difference in gas prices based on county. Most of this is a result of county and state taxes. To see this, go to GasBuddy and look at their “gas price heat map”. When you see color changes like this that occur at state borders you know the reason for it is policy differences across states. Within states, there are certainly county level differences in price, and some of these are caused by policy and some by local conditions.*

* I can’t say why right now Iron and Washington counties have high prices. Typically Utah is pretty uniform.

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