NCPA - National Center for Policy Analysis

How to Lower the Price of Gas

October 2, 2014

Gas prices have remained high for years. When one pays for gas, the majority of the cost covers the price of crude oil -- 67 percent of the price of gasoline. Other costs include refining (14 percent) and taxes (12 percent), followed by retail and transportation costs. The amount of taxes vary depending upon the state. While the federal gasoline tax is 18.4 cents per gallon (and higher for diesel fuel, at 24.4 cents), states charge between 12.4 cents per gallon in Alaska to 52.6 cents per gallon in California.

Heritage Foundation Fellow Nicholas Loris identifies a few things that lawmakers could do to lower the price that Americans are paying at the pump. These include:

  • Getting rid of the crude oil export ban. Currently, Americans are restricted from exporting crude oil. Yet, according to a study from information firm HIS, lifting the ban would reduce gasoline costs by eight cents per gallon and create 1 million additional jobs by 2018.
  • Lift drilling bans and approve Keystone XL. Alaska's ANWR contains 10.4 billion barrels of oil, and America's coasts are oil-rich, yet they are subject to an exploration ban. New production would increase supply and push down prices, and approving the Keystone XL pipeline would yield benefits to the U.S. economy.
  • Get rid of the ethanol mandate. Refineries are required to blend ethanol into gasoline each year - an amount which increases annually. According to the Congressional Budget Office, the ethanol mandate alone will increase the price of gas by 13 cents to 26 cents per gallon by 2017.
  • Do away with the Jones Act. The Jones Act requires goods shipped over water between two American points to be transported on an American ship. The law inhibits competition, driving up prices. According to the International Energy Agency, repealing the law would cause gas prices to fall by 15 cents.

Loris reminds readers that gas prices have an impact beyond the pump, raising the price of food and other goods and services, all of which have their own transportation costs. As prices rise, economic growth and job creation slows.

Source:  Nicolas Loris, "5 Policies That Would Make Gas Cheaper," Daily Signal, September 30, 2014.


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