Every year, Americans spend about $750 billion for gasoline and electricity—about 4 percent of the economy—with roughly equal amounts spent to fuel vehicles vs. keeping the lights on and running our factories.
Where you live significantly affects how much you pay for these basic energy commodities.
Excepting Alaska and Hawaii due to their unique supply challenges, the highest gasoline prices in the nation this week were found in California—$3.23 per gallon. California also has the nation’s highest gas tax at $0.53 per gallon. The least expensive gasoline in the nation is found in Alabama at $2.27 per gallon. Alabama’s gas tax ranks 38th in the nation at $0.21 per gallon.
However, gasoline prices are more than the sum of supply and demand and fuel taxes. Regulations and corporate taxes also play a big role in determining refinery operating costs as well as expenses throughout the entire supply chain. This manifests itself in the final price to consumers.
Retail electricity prices also vary significantly from state-to-state. For instance, Louisiana had the lowest overall electric rates from 2015 to 2016, powered by inexpensive and abundant natural gas, at 7.53 cents per kilowatt-hour. At 7.55 cents per kilowatt-hour, Washington State was close behind with its large production of low cost hydropower. At the other end of the scale was Connecticut, with an overall retail electric price of 17.52 cents per kilowatt-hour, more than double the price in Louisiana.
Looking at both gasoline and electric prices for the 48 contiguous states and weighting each the same shows that Louisiana and Oklahoma have the nation’s lowest prices for these two essential energy staples. Louisiana’s combined gasoline and electricity prices were 37 percent below the national average while Oklahoma enjoyed a discount of 33 percent below the national average.
Paying the most for electricity and gasoline were Connecticut and California, at 76 percent and 75 percent above the national average, respectively.
With retail electric sales of $381 billion in 2016 and some 143 billion gallons of gasoline sold the same year, the additional costs or savings adds up to tens of billions of dollars, depending on the state and its tax and regulatory policies.
The American Conservative Union (ACU) analyzes the votes of state legislatures across the nation and compiles a useful state ranking, showing the adherence to conservative principles in each statehouse annually.
The decisive test for policy is how it benefits people. Conservatives believe that lower taxes, less regulation and more liberty leads to human flourishing. Liberals believe that bureaucrats and lawmakers should make many basic decisions, instead of responsible individuals.
Since electric and gasoline prices are easily measured, it is possible to compare these energy costs to state policy. The connection between political principles and energy costs is readily apparent.
Excluding Alaska and Hawaii, the ACU rated 30 state legislatures as casting conservative leaning votes in the legislative sessions from 2014 to 2017. Of these 30 states, with elected state representatives committed to liberty, lower taxes and less regulation, 26 enjoyed combined gasoline and electricity prices below the national average.
Of the remaining 18 liberal-leaning states, 10 of them had above average costs at the gas pump and on the electric bill.
The correlation between these two measures, public policy and energy costs, was high with a coefficient of determination or “R squared” of 0.51, meaning that the philosophy of elected state representatives has a strong predictive link to energy prices in a state.
The next time somebody tries to tell you that “There’s not a dime’s worth of difference” between the parties, ask them how much they paid to fill their gas tank and keep the lights on.