Pump prices: Why are gas prices lower in Iowa, higher in Illinois

Published: Dec. 12, 2022 at 4:36 PM CST
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DAVENPORT, Iowa (KWQC) - Prices at the pump are falling just in time for the holidays, with national averages hovering around $3.25 a gallon, 52 cents lower than a month ago.

Overall, gas prices are 6 cents lower than a year ago.

Pump prices vary depending on all kinds of factors, including world oil prices, crude supplies, refinery locations and how much it costs to transport gas.

But why is there such a difference from one Quad-Cities station to the next?

Taxes are a major factor, but there could be other contributors as well, said Molly Hart, a spokeswoman for AAA-The Auto Club Group.

Stations that set prices consider the number of cars filling up, their location relative to other stations and when they bought gas. Stations buy fuel in advance, so even if oil prices drop, the stations reflect pump prices depending on what they paid wholesale.

Fuel delivered to the Quad-Cities doesn’t always come from the same refinery, another factor in cost.

“In regards to differing prices at the pump, traffic and location can play a role as well as supply and demand, local taxes, and retailers who sell more fuel often enjoy a better wholesale price,” Hart said. “If there are stations close to each other, they’re more likely to offer competitive pricing.”

In the Quad-Cities, perhaps the most significant factor is taxes.

Iowa lawmakers set the statewide gas tax each year on July 1, based on previous ethanol sales compared with the total amount of gasoline sold. The tax this year is 30 cents a gallon.

In Illinois, the state raised its gas tax last year to 39.2 cents per gallon. Lawmakers opted to tie an automatic tax raise to inflation, not to exceed a penny. The government also collects gas taxes in other ways, including for underground storage tank fees and environmental impacts. Illinois’ sales tax is 6.25%, but localities can also tax gas as high as 10% in some towns, according to the American Petroleum Institute. Cities of more than 100,000 can also impose a surcharge of 1 cent per gallon by referendum.

All things considered, near-term prices are likely to keep falling at pumps on both sides of the river.

“The seasonal pattern of less driving due to shorter days and crummy weather, combined with a lower oil cost, is driving gas prices lower,” Hart said. “If this trend continues, many states could see their average prices fall below $3 a gallon by early next year.”

That’s already happened in the Iowa Quad-Cities, according to GasBuddy, a site that tracks prices across the country. The low prices Monday in Davenport were $2.49 at many stations. In Moline, the lowest prices were closer to $3.45.