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Gas Prices Explained

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The price of gasoline affects everyone. Recognizing this fact, Utah’s petroleum industry strives to provide a reliable supply of fuel products for consumers at fair market prices. Crude oil and gasoline are commodities and are subject to market forces like any other commodity. Fuels manufacturing, distribution and marketing are extremely competitive businesses.

Factors Affecting the Price of Gasoline
  • The cost of crude oil
  • Supply
  • Demand
  • Market conditions
  • Taxes
What Determines the Cost of Crude Oil?
The cost of crude oil is the largest factor in the retail price of gasoline. The cost of crude oil as a share of the retail gasoline price varies over time and across regions of the country. Crude oil prices are determined by both demand and supply. World economic growth is the most significant factor for demand. Increases in U.S. oil production in the past several years have helped reduce upward pressure on oil and gasoline prices.

Crude oil used in Utah is produced in Utah, other Intermountain West states and Canada. Oil production plays a key role in the economic development and wellbeing of rural Utah. Utah’s refineries “monetize” and provide value to Utah’s crude oil which otherwise would struggle to find markets. Due to its waxy, paraffinic nature, nearly all Utah crude oil has to be trucked to refineries.

Fuel Supply and Refining Operations
Utah has five petroleum refineries capable of processing approximately 197,000 barrels of crude oil per day. All five Utah refineries are classified nationally as “small refiners”. Additionally, gasoline is imported to Utah via a refined products pipeline equal to approximately the volume of the State’s largest refinery. Utah refineries also export fuel both North and South via product pipelines to Nevada, Idaho and Washington.

Refining costs and profits vary seasonally partly because of different gasoline formulations required to reduce air pollution. Each Spring, Utah refiners change their gasoline formulation to reduce the more volatile components in the gasoline which more easily evaporate and can lead to the formation of summer ozone. This change shrinks the available pool of gasoline. Utah refiners continue to produce cleaner burning fuels that greatly benefit Utah’s environment and quality of life.

Refineries are a highly complex series of plants and processes that require occasional maintenance to keep them operating at peak performance and in a safe and environmentally optimized fashion. Refinery “turnarounds” or maintenance operations can affect the supply of fuel in the Utah marketplace. Unplanned refinery outages, pipeline disruptions or other factors can also play a significant role in the supply of fuel available for sale.

Consumer Demand and Economic Growth
Utah’s booming economy continues require adequate and reliable supplies of gasoline, diesel and jet fuel to keep business, industry and families moving. In addition to manufacturing gasoline and diesel, Utah’s refineries produce a significant amount of jet fuel that supplies Salt Lake’s International Airport and Hill Air Force Base.

Petroleum demand generally rises in the Spring and Summer months, and fuel prices typically increase to match in order to ensure a ready supply. Increased construction, commerce and industry associated with Utah’s robust economy all require increasing reliable fuel supplies.

Market Conditions and Your Local Gas Station
Distribution, marketing, and retailer costs and profits are also included in the retail price of gasoline. Gasoline in Utah is either shipped by pipeline to terminals or truck to individual gasoline stations.

Some retail outlets are owned and operated by refiners, while others are independent businesses that purchase gasoline from refiners and marketers for resale to the public. The price at the pump also reflects local market conditions and factors, such as the desirability of the location and the marketing strategy of the owner. The number and location of local competitors can also affect prices.

Taxes Add to the Price of Gasoline
Federal, state and local government taxes also contribute to the retail price of gasoline. Utah’s state tax is currently 29.4 cents per gallon and the federal tax is 18.3 cents per gallon. Combined with a small per gallon fee for underground storage tanks, the total tax on each gallon of gasoline in Utah is 47.81 cents per gallon.

What is Octane and Why Does It Affect Price?
The octane level of gasoline refers to its resistance to combustion. Gasoline with a higher-octane level is less prone to pre-ignition and detonation, also known as engine knocking. Refiners charge more for higher octane fuel because the materials and processes required to produce higher octane fuels are expensive.

Utah refiners continue to produce clean, reliable fuels that are critical to the continued economic success and high quality of life that Utah residents enjoy.
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The Basics of Price

Utah’s petroleum industry strives to provide a reliable supply of products for consumers at fair market prices

Crude oil and gasoline are commodities and are subject to market forces like any other commodity

Sometimes we’re above the national average price, sometimes we’re below
Over time, markets equalize based on supply and demand
Utah’s isolated market is sometimes slow to go up and slow to go down, but market forces always dictate direction and speed

Competition is Good
Utah is a small market
There are five small refineries plus one products pipeline competing to supply the market

Factors Affecting Price

Crude Oil
Market Conditions

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Crude Oil

GRAPH - Crude Oil Receipts

Crude used in Utah originates in the Intermountain West or Canada
The price of crude oil is set in the international marketplace.
Utah refiners pay “market price” for the crudes they use
Percentage of Utah crudes used has grown significantly
over the past 2 years

Crude Oil

GRAPH - Oil Production by County

Oil production plays a key role in economic development in rural Utah
Utah’s refineries “monetize” and give
value to Utah’s crude oil
Nearly all Utah crude has to be trucked to


Utah’s refineries produce over 3.6 million gallons of gasoline and 1.9 million gallons of diesel each day
Comparatively, California refineries produce 46.5 million gallons of gasoline and 8.7 million gallons of diesel each day
Utah’s 5 refineries have a combined capacity of 167,000 barrels per day throughput
Lack of Economies of Scale


Utah drivers and industry use over 3 million gallons of gasoline and 1.7 million gallons of diesel each day
In comparison, California consumes 44 million gallons of gasoline and 10 million gallons of diesel each day
Utah both imports and exports fuel.
Most excess refined capacity goes to supply points north via pipeline
Nationally, gasoline demand was up 3.8 percent in March over the previous year and is up 1.4% year to date

    • As of 2015, Utah ranks 11th nationally in oil production and 12th among states in natural gas production.
    • There are currently 141 operating refineries in the United States with 5 located in Utah. Utah refineries produced over 36 million barrels (1.5 billion gallons) of motor gasoline in 2015 and over 19 million barrels (798 million gallons) of distillate fuel (diesel).
    • Well completions in Utah (both oil and gas) have declined dramatically over recent years as commodity prices plummeted and have stayed low. There were 1243 completions in 2008, 925 in 2014 and only 305 in 2015.
    • Duchesne (46%), Uintah (34%) and San Juan (12%) Counties accounted for 92% of oil production in Utah in 2015. The balance was produced collectively from Sevier, Grand, Summit, Carbon and Emery Counties.
    • The ratio of oil wells drilled in Utah versus natural gas wells has shifted significantly over recent years as commodity prices have affected company's drilling programs. In 2008, only 28% of wells drilled were for oil while in 2014, 76% of all wells drilled were primarily seeking oil.
    • Wages for energy-related jobs are nearly double the average annual wage for all employment in Utah.
    • In 2015 petroleum products and natural gas accounted for 59% of total energy consumed in Utah. Coal was responsible for 38% while all renewables combined made up 3% of energy use.
    • Utah refineries received record amounts of crude oil in 2014 and only slightly less in 2015, with 43% coming from in-state and 8% coming from Canada.
    • Fossil fuels made up 98% of Utah’s total energy production in 2015, while renewable sources accounted for only 2% of Utah’s production portfolio.
    • Property taxes charged against Utah oil and gas activities have increased more than six times since 1996, totaling nearly $64 million in 2015.
    • The value of crude oil produced in Utah reached an all-time inflation-adjusted high of $3.2 billion in 2014, but then dropped to only $1.5 billion in 2015 as commodity prices sank.
    • Natural gas production in Utah reached a record high in 2012 of 491 billion cubic feet, but has since dropped to 423 billion cubic feet in 2015.
    • Oil and gas operations in Utah account for about 1.3% of the State's gross state product. Utilities (including some non-energy sectors), refineries, and pipeline transportation and maintenance account for an additional 1.9%.
    • The last major refinery built in the United States was put into operation in 1977.
    • Utah’s average price of residential natural gas in 2015 was $9.72 per thousand cubic feet, the 17th lowest in the nation. As recently as 2011, Utah’s price was the third lowest in the nation, but new natural gas pipelines have better connected our once captive market with the rest of the United States.
    • Natural gas is the largest source of annual energy production in Utah, surpassing coal for the first time in 2010.
    • In 2015, 76% of the electricity generated in Utah was from coal-burning power plants. Electricity generation from natural-gas power plants more than doubled since 2007, increasing its total share in 2015 to 19%.
    • Utah produced 18% more energy than it consumed in 2015, continuing its status as a net-energy exporter. This percentage is usually closer to 30%, but production of fossil fuels was significantly down in 2015.
    • Energy-related employment in Utah declined to 15,367 in September of 2015 (down 16% from the 18,236 recorded in October 2014 prior to the oil price crash), of which the majority (30%) came from the oil and gas sector.
    • Average yearly wages in the energy sector ($83,400, first three quarters of 2015) are more than double the statewide average annual wage ($41,500, first three quarters of 2015).

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