Why are Utah’s gas prices routinely higher than the national average?

SALT LAKE CITY — It currently costs, on average, a little more than $4 for a gallon of regular unleaded gas in Utah, according to the AAA gas prices index on Thursday.

That’s about 30 cents higher than it was last November but also much lower than it was this summer as shortages and inflation drove prices up to a record $5.26 per gallon at the start of July.

However, Utah’s prices are also close to 30 cents above Thursday’s nationwide average of about $3.73; gas prices are even as low as $3.07 per gallon in Texas at the moment. The national average’s record high this summer also never got as high as it did in the Beehive State, stopping at $5.02.

This has been the case over the past few years — after Utah’s prices were once close to or below the national average. What gives?

That’s essentially what Utah Gov. Spencer Cox asked the Utah Office of Energy Development earlier this year, fueling a new report that analyzes why Utah’s gas prices are almost always higher than the U.S. average these days.

The 33-page report, released Thursday, explains that the higher cost is the result of “many factors” but it mainly boils down to one simple economic principle: supply and demand. This isn’t only a Utah problem, it’s why gas prices are generally higher in the West, as the AAA gas map shows.

The report says that closed refineries and biofuel conversions in the West are resulting in higher demand for Utah’s refined products. Meanwhile, the state — and region for that matter — is growing in population at higher rates than other parts of the country. This means there are more people searching for fuel than there is fuel to divvy out from the state’s refineries.

“Demand for gasoline and other motor fuels continues to rise in the West, while government incentives and other political pressures encourage supply termination — a variable that is relatively new in petroleum market forces,” researchers wrote. “The current paradigm positions the West in a circumstance where local demand, particularly along the West Coast, is outstripping local supply, leaving out-of-state supplies, like those coming in from Utah, to fill in the void.”

Utah’s cost of crude oil is cheaper than the national average — at least over the past year — but it costs more to refine than the national average, the report notes.

Utahns also pay an additional 50 cents per gallon in state and federal gas taxes, which is just above the national average. Gas costs 3 to 4 cents more in Salt Lake and Davis counties because of Environmental Protection Agency regulations.

“When adding in federal, state, and local government taxes, the total cost of gasoline that Utah consumers pay at the pump averages $3.07 per gallon over the past five years and $4.17 per gallon over the past year,” the report says.

Gas prices in Utah could rise in the future because of other factors, too. For example, the Utah Office of Energy Development writes that Utah’s fuel tax includes an “inflationary trigger” that will increase the state’s gas tax by 4.5 cents per gallon beginning in January.

The report also points out that the Wasatch Front’s air quality is currently listed as in “moderate” non-attainment for ozone, per federal standards. If that goes up to “severe,” something that could happen with more people in the region and cars on the roadways, Utah would be required to switch to reformulated gasoline in non-attainment areas, raising the price by 36 cents per gallon.

Ultimately, the report says the higher-than-average prices will continue to be an issue while there’s a supply-demand imbalance.

Addressing supply

As KSL TV reported in September, Utah’s five refineries produce 204,000 barrels per day, which pales in comparison to the 5 million barrels produced by Gulf Coast states. The report acknowledges that Utah has increased its crude oil production by 24% over the past 10 years but its refineries are “at capacity.”

The report suggests possibilities to help lower the costs through increasing supply, such as pipelines with neighboring states. Further research might be done to improve the supply chain so that it lowers the cost of fuel.

“We’ll continue working with policymakers and industry to find ways to increase supply and reduce prices,” Cox said, in a reaction to the report.

What about demand?

The other option is to lower demand at the pump. This could come as drivers and car companies slowly opt for alternatives, like electric vehicles, especially with climate concerns related to greenhouse gases.

So far, it’s a small dent. Utah ended 2021 with a rate of about 5 electric vehicles per 1,000 registered vehicles at the end of 2021, though that was above the national average of 3 per 1,000, per U.S. Department of Energy data.

But James Campbell, the innovation and sustainability director for Rocky Mountain Power, told KSL TV in September that he believes electric vehicles are on the cusp of taking over traditional gas vehicles, citing new tax credits and expanding electric infrastructure. And General Motors announced last year that it wants to only sell zero-emission vehicles by 2035.

“We’re at the beginning of the change,” Campbell said. “We’re right at that spot where it’s about to take off.”

Thursday’s report outlines a few ideas that could also decrease gas demand, including “more efficient options” for public transportation, as well as creating public messaging or programs that promote less fuel consumption or lower the number of commuting trips people take during the workweek. These ideas “should focus on getting vehicles off the road,” the report stresses.

Moving forward

The Utah Office of Energy Development completed its study by reviewing nearly a dozen federal, state and other available datasets.

With a better understanding of the situation now available, Greg Todd, Cox’s energy advisor and the office’s executive director, said the organization will continue to review ways to address the high gas prices in the future.

“We are working with Gov. Cox and industry leaders to look for ways to help Utahns find relief,” he said, “while respecting the free market under which the industry operates.”