I’ve been on the road this week and noticed a nice change at the pump in the state of Pennsylvania: lower gas prices.
According to the Pennsylvania Department of Revenue, the motor fuel tax rate, also known as the gas tax, dropped to 57.6 cents per gallon at the beginning of the new year (Jan. 1, 2024) and will remain in place throughout the calendar year. The rate had previously been set at 61.1 cents per gallon tax for the past five years.
Will the savings add up for my fellow Keystone State residents? You might not feel it as much as you’d expect.
According to PolicyGenius, an online insurance broker, the average Pennsylvania driver covers about 11,445 miles each year, just under the national average of 14,263 miles per driver. Assuming mileage of around 20 miles per gallon (a guesstimate taking into account old and new cars, since, according to the U.S. Department of Energy, the average fuel economy of new vehicles sold in the United States in 2021 was 25 mpg), that means the average Pennsylvania driver should expect to pump about 572 gallons into their car this year. A four-cent-per-gallon savings translates into just under $23 for the year.
Still, Pennsylvania drivers are likely to be chuffed with the price dip—any chance to pocket savings is a win. However, according to the U.S. Energy Information Administration, the Commonwealth’s motor fuel tax remains above average as compared to other states.
State Gas Taxes
Not every state saw a dip at the pump in 2024.
Oregon’s gas tax rose to 40 cents per gallon as of Jan. 1, 2024. That’s an increase of two cents per gallon from last year when it was 38 cents per gallon. Additional local taxes may also apply. Fortunately, those extras won’t catch you off-guard. By state law, service stations must “visibly post” the cost of federal, state, and local taxes per gallon.
Utah also saw a price hike. Utah’s gas tax switched over to 36.5 cents per gallon in the new year, compared to 34.5 cents per gallon in 2023.
And if it feels like you’re paying more in New Jersey, you are, but that change went into effect a few months ago. New Jersey’s gas tax rate was bumped by 0.9 cents per gallon as of Oct. 1, 2023, to comply with a 2016 law requiring a steady stream of revenue to support the State’s Transportation Trust Fund program. The state noted that fuel consumption was down from projections, primarily due to lower diesel use. To ensure that the Garden State has the funds necessary to support certain infrastructure projects, the Petroleum Products Gross Receipt tax rate must be adjusted to generate roughly $2 billion annually—that explains the increase. In New Jersey, what is generally called the “gas tax” or the “highway fuels tax” is two separate taxes on gasoline and diesel fuel—the Motor Fuels tax and the Petroleum Products Gross Receipts tax.
Rankings
As of last summer, the highest gas tax in the country belonged to California, which charges a whopping 77.9 cents per gallon (sales and excise taxes). That’s the result of 2017 legislation, the Road Repair and Accountability Act, which raised transportation-related taxes, including the state excise tax on fuel, and increases every year to adjust for inflation.
Illinois, Pennsylvania (even with the dip), Indiana, and Washington are next in line. Taxpayers pay the lowest gas tax rates in Alaska, Missouri, Mississippi, Hawaii, and Arizona.
(Note that the map reflects data from July 1, 2023. The Tax Foundation data includes different taxes and fees, not including carbon fees, to calculate a total tax rate on gas for each state, and is not based solely on fuel taxes. However, while the Jan. 1, 2024, adjustments impact your wallet, they do not impact the overall rankings.)
Federal Taxes
The federal gas tax is 18.4 cents per gallon (24.4 cents per gallon for diesel) as of July 1, 2023. That rate hasn’t changed since 1993.
Federal taxes include excise taxes of 18.3 cents per gallon on gasoline and 24.3 cents per gallon on diesel fuel, plus a Leaking Underground Storage Tank fee of 0.1 cents per gallon on both fuels.
How Gas Taxes Work
Most of the time, you don’t think about the specific state taxes at the pump because, outside of states like Oregon that require service stations to display the taxes, you tend to focus on the price per gallon.
State taxes aren’t necessarily “added” to your receipt. For tax purposes, the retail owner pays state gas tax when they buy the gasoline for resale—that’s when the gas goes into the pump. That tax is passed along to the consumer in the state as part of the price per gallon—it’s not a separate tax.
Prices Are Dipping
Even if you don’t see a drop in gas taxes, you’re still paying less at the pump this year. According to AAA, the average cost of a gallon of regular gas nationwide is $3.088. That’s 15 cents less than a month ago and 17 cents less than a year ago. And the price could continue to go down, thanks to lower demand, as fewer people are fueling up after the peak of holiday road travel (obviously, I’m an exception).
“January is a bit of blah time of year, and gas prices are in the doldrums as well,” said Andrew Gross, AAA spokesperson. “Barring some unexpected shock to the global oil market, gas prices will likely shuffle up and down a few cents for a while.”
Here’s why supply and demand aren’t entirely to thank (or blame) for prices at the pump. Weak gas demand, combined with increased supply, typically pushes prices lower. However, the rising cost of oil prices (attributable, in part, to tensions in the Middle East and supply issues in Libya) has limited price decreases. That said, if gas demand remains weak, drivers will likely continue to see prices go down.