Why are Utah gas prices so high? Blame the West Coast and our growing population
The average cost for a gallon of gasoline in Utah is just above $4. It’s down significantly from the record-high price of $5.26 in July, but still about 30 cents more than the national average.
To understand why gasoline is more expensive in Utah, the Utah Department of Energy Development released a report analyzing the issue at the request of Gov. Spencer Cox.
The one major theme highlighted: West Coast demand for Utah-based oil products is growing because of limited supply throughout the west due to refinery closures and increased biofuel conversions.
“Utah refineries now supplement out-of-state markets that are experiencing diminishing supplies, adding pressure to Utah's traditionally cost-effective product,” the report reads.
In other words, some states are closing oil refineries and replacing them with biofuel production. That move, the report states, is “creating pricing pressure” on Utah’s oil market to pump out more of the resource to help meet exporting demand.
Harry Hansen of the Utah Office of Energy Development noted the West Coast has lost the production capacity of 250,000 barrels of oil per day over the last five years because of shuttered refineries. That is causing states to look elsewhere for oil products.
Hansen added Utah’s “free market approach” to oil has kept prices low compared to other states that have a strong regulatory grip on oil. Even so, Utah’s refined oil market is tied to other West Coast states. Those states are willing to pay for Utah’s oil because it’s a cheaper alternative, which in return drives up the price for Utahns.
About 30% of Utah’s refined oil was exported in 2020 and 2021, according to the report.
A growing population also contributed to higher prices. The report said the demand for gas has “steadily increased over the past 60-plus years,” and gas consumption has spiked 22%.
While Utah’s refineries have been able to keep up with demand, they’re now hitting capacity limits.
“Each refinery can only do so much a day,” said Utah Department of Energy Development Director Greg Todd. “There is no more capacity.”
He added there isn’t the ability to expand the production capacity immediately because of local and federal red tape.
Utahns consume about 85,000 barrels of gasoline a day, according to the report. Utah’s five refineries consistently produce 196,000 barrels of all oil products, like gasoline, diesel, jet fuel and propane, a day.
Hansen expects gas prices to steadily drop throughout the next few months. Over the last five years, he said fuel costs have dipped in December, January and February.
AAA spokesperson Julian Paredes said gas prices are higher than this time last year but are trending downward.
“The latest data shows demand for gasoline actually pretty low and the stock and supply of gasoline is on the rise,” he said.
That may be of little consequence though. In 2015, the Utah Legislature passed HB 362, which allowed the state’s gas tax to fluctuate based on the average price of fuel. So come January 2023, Utah’s fuel tax is expected to add another 4.5 cents per gallon because of high inflation.
Prices could also spike another 90 cents per gallon over the summer when demand for fuel is at its highest in the nation, the report said.