Isn't it strange how gasoline prices are way lower in poorer states?

Question

Can anybody explain this phenomenon?

Answer 1

The charge less in taxes..

The variable between states is the amount they tax their gasoline.  Here is a link to update you on what state charges what amount of tax:

http://www.gasbuddy.com/tax_info.aspx

Answer 2

Demand is down, and it is down most in poorer areas, thus refiners and suppliers in those area have trouble moving their fuel at the prices they would like to get. Another reason is that gas sold in California has to be made in a special, more expensive way.

If you are rich enough, price is no object so you keep on consuming full out no matter how high gas prices get.

Yes, that idea is called elasticity of demand. The poors' demand is somewhat elastic, the riches' demand is somewhat inelastic.

Even at the high prices of gas today, some refiners are losing money because there is not enough demand to get prices high enough to cover the new higher price of oil. Of course, I'm speaking of refiners who have to buy oil at the world price, not just pump it.

Answer 3

That's interesting; I hadn't realised. Basically the oil companies s***w as much out of people as the think they can.

Totally unconnected but it's the same if you go to a cinema. I live in London and would expect to pay extra to go into the West End, which is the equivalent to say; Broadway. But if I go to the cinema in the suburbs, the price changes according to the incomes of the people living there. All very strange.

Answer 4

Because the more gas people buy shows that their is a higher need for it resulting in inflation of gas prices. Less people have cars in poorer states, so gas prices tend to not inflate, bc not a lot of people are buying gas.

hope this helped

Answer 5

because richer states have more people with gas guzzling SUVs?

Answer 6

Elasticity of Demand.

The elasticity of demand measures consumer responsiveness to price change. Elastic consumers respond greatly to a price change. Inelastic consumers do not.

One factor of elasticity of a product is the portion of your income the product represents. A poorer person will automatically have a more elastic demand than a richer person. Companies will price items lower in more elastic (poor) markets and accept a lower profit margin but the larger volume makes up for this.

Answer 7

I don't think the "poorer" states have lower gas prices.  It all has to do with the state taxes increasing the cost, like in NY the state collects more than AZ.