Why Gas Prices Can Differ by $1 Between Stations a Block Apart

Drive one block in almost any American city and gas prices can swing by 30, 50, even 80 cents a gallon. Zoom out to the whole country and the gap gets absurd: in early February 2025, AAA had Mississippi averaging $2.68 a gallon while California sat at $4.46 — a $1.78 spread for the same product, sold under many of the same brand names. None of that is a mistake or a scam. It's the visible result of a pricing system with a lot more moving parts than most drivers ever see.

This piece follows Tuesday's look at why car insurance premiums keep climbing even for careful drivers — another case where a household cost looks arbitrary until you see what's actually baked into it.

Taxes are the most predictable variable

Every gallon sold in the U.S. carries an 18.4-cent federal excise tax before a single state fee is added. States then layer on their own gasoline taxes and fees, and the gap between them is enormous: as of July 2024, combined state taxes ranged from 27.4 cents a gallon in Alaska to 87.8 cents in California, according to the U.S. Energy Information Administration. That 60-cent swing alone accounts for a meaningful chunk of the price difference between a fill-up in Anchorage and one in Los Angeles, before anything else is factored in.

Where the gasoline actually comes from matters

EIA's 2025 regional price data shows how much geography still drives cost, even after taxes are stripped out:

The Gulf Coast sits closest to the country's refining capacity, which keeps transportation costs down. The West Coast, and California in particular, is nearly its own island: the state requires a uniquely reformulated blend that few refineries outside California are equipped to produce, so when something goes wrong — a 2015 stretch of refinery fires and outages being the clearest example — replacement fuel often has to arrive by barge rather than pipeline, and prices spike until supply catches up. Pipeline disruptions elsewhere, including the kind hurricanes cause along the Gulf Coast itself, can trigger the same short-term spikes in reverse.

Two stations, two different wholesale prices

Even stations that look identical from the street can be paying different prices for the identical fuel. Wholesale costs vary by 10 to 20 cents a gallon depending on how much volume a retailer buys — high-volume buyers get discounts smaller operators don't — and on brand. A station flying a major name like Shell or Chevron typically pays a few extra cents per gallon at the wholesale level for the branded additive package and marketing support that comes with it, according to the National Association of Convenience Stores. Real estate matters too: a corner lot in a high-traffic location costs more to lease or own, and that overhead shows up at the pump.

Why the station itself may not want your gas business

Here's the part that surprises most drivers: for the retailer, gasoline is often closer to a loss leader than a profit center. NACS data shows gas sales generate about 67% of a convenience store's revenue but only 39% of its profit — the average margin on a gallon of gas is roughly 10 cents, thin compared to what a store makes on coffee, snacks, or a fountain drink. That's why so many stations compete hardest on pump price near busy intersections: the goal isn't the fuel margin, it's getting a car into the parking lot next to the register.

AAA fuel experts point to the same core set of factors when explaining regional and local swings — taxes, supply logistics, and competition among nearby stations — while noting that drivers can meaningfully cut what they pay by comparing prices before they need to fill up rather than defaulting to the nearest pump.

What actually helps at the pump

None of these factors are things an individual driver can change. What a driver can change is which station they choose. Because margins are thin and wholesale costs vary station to station, price-comparison apps and simply noticing which corner consistently runs a few cents cheaper can save real money over a year of fill-ups — often more than switching brands or chasing loyalty discounts ever will. The $1.78 gap between Mississippi and California isn't coming down anytime soon. The 10-cent gap between two stations on the same street is the one worth paying attention to.