Gas prices vary from station to station because of a surprisingly long chain of factors, from the wholesale price each station pays for fuel to its rent, local competition, tax jurisdiction, and even how you choose to pay. Some of these differences are just pennies, but they stack up. On a 2023 national average of $3.52 per gallon, over 14% of the price goes to distribution and marketing costs alone, and that slice varies wildly depending on a station’s specific circumstances.
What Actually Makes Up the Price Per Gallon
Every gallon of gas you buy is really four costs bundled together. Based on 2023 averages from the U.S. Energy Information Administration, crude oil accounts for about 52.6% of the retail price. Refining costs and profits make up 18.7%. Federal and state taxes add 14.4%. Distribution and marketing round it out at 14.3%. Two stations in different states, or even different counties, can start with different numbers in almost every one of those categories before they ever set a price on their sign.
Taxes Create Big Gaps Between States
The federal gas tax is 18.4 cents per gallon and hasn’t changed since 1993. State taxes and fees, however, are all over the map. As of January 2026, California charges the most at 70.9 cents per gallon, while Alaska charges the least at 9 cents. That 62-cent spread has nothing to do with the fuel itself. If you cross a state line and notice a price jump, taxes are almost always the biggest reason.
Even within a single metro area, stations sitting in different counties or municipalities can face slightly different local taxes or fees, creating price differences of a few cents per gallon that seem random but are baked into the cost structure.
Wholesale Prices Aren’t the Same for Every Station
Most people assume that every Shell or Chevron station buys fuel at the same price. They don’t. Major fuel suppliers use a practice called zone pricing, where they divide a region into “price zones” and charge different wholesale rates to stations in each zone. A former Mobil filing described the process: the company analyzes competitive conditions, traffic patterns, distances, natural barriers like rivers, and man-made barriers like highways to draw zone boundaries so that stations in different zones don’t directly compete with each other.
This means two branded stations five miles apart can pay meaningfully different wholesale prices for the exact same fuel. The station in a zone with less competition gets charged more, and that cost gets passed to you.
Branded Fuel Costs More Than Unbranded
Stations flying a major brand name (Shell, BP, Chevron) typically pay a premium for branded fuel that includes proprietary additive packages. Top Tier gasoline, for example, contains two to five times more detergent additives than the EPA’s minimum requirement and prohibits metallic additives that can damage emission systems. That higher-quality additive package costs roughly 3 cents more per gallon at the wholesale level.
Three cents doesn’t sound like much, but it’s one of several small premiums that add up. An independent or unbranded station buying fuel that meets only EPA minimums can undercut a branded competitor on price while selling a product that’s perfectly legal and functional, just less enhanced.
Location and Competition Drive Local Prices
The EIA puts it plainly: prices are often highest where there are fewer stations nearby. Even stations close together can have different rent, traffic patterns, and supply sources that push their costs in different directions. A station next to a highway exit pays premium rent for that high-visibility, high-traffic spot and prices accordingly. A station two blocks off the main road, with lower rent and fewer passing drivers, needs to compete on price to pull people in.
This is also why gas near airports, tourist areas, and interstate rest stops tends to cost more. The customers at those locations are less likely to shop around. They need fuel now, and the station owner knows it. In economic terms, the customers are less price-sensitive, so the station can maintain a wider profit margin.
Big-Box Stores Use Gas as Bait
If the cheapest gas in your area is at Costco or Sam’s Club, that’s by design. Warehouse clubs operate their gas stations as loss leaders, selling fuel at razor-thin margins or sometimes at a loss. The goal isn’t to make money on gas. It’s to reinforce the value of your membership and get you inside the store, where margins on other products are much higher. Traditional gas stations, which rely on fuel sales as a core part of their business, simply can’t match that strategy and stay solvent.
Credit Card Fees Create a Hidden Split
You may have noticed some stations post two prices: one for cash, one for credit. Credit card processing fees cost the station between 1.5% and 3.5% of the transaction total. On a $50 fill-up, that’s roughly 75 cents to $1.75 the station loses to the card network. Some stations absorb that cost. Others pass it on, and the difference between the cash and credit price can range from 10 cents to, in extreme cases, a full dollar per gallon. A Florida station was recently found charging a $1 per gallon surcharge for card payments.
Stations that don’t post a dual price are still paying those processing fees. They’ve just folded the cost into their single posted price, which means their baseline number may look higher than a nearby station that advertises a lower cash price.
Prices Rise Fast and Fall Slowly
If you’ve ever felt like gas prices spike overnight when oil prices rise but take forever to come back down, you’re not imagining it. Economists call this the “rockets and feathers” effect. When crude oil prices jump, stations raise prices quickly to protect their margins. When crude drops, prices drift down more gradually. The lag happens because of real costs like transportation, storage, and the price the station already paid for the fuel sitting in its underground tanks, but it also means some stations are quicker to lower prices than others based on their competitive pressure and inventory cycles.
This timing difference is another reason two stations on the same street can show different prices on any given day. One may have received a delivery at last week’s higher wholesale price, while the other just got a fresh load at the new, lower rate. Over time they’ll converge, but on the day you’re driving past, the gap can be noticeable.
How All These Factors Stack Up
No single factor explains the price difference between two stations. It’s a combination: different wholesale costs from zone pricing, different tax jurisdictions, different rent and overhead, different brand premiums, different competitive environments, and different policies on credit card fees. A station right off the interstate, branded with a major name, in a high-tax state, with no nearby competitors might charge 30 to 50 cents more per gallon than an unbranded station in a low-tax area with a Costco across the street. Neither station is doing anything unusual. They’re just operating under very different cost structures and competitive pressures.
Apps like GasBuddy exist precisely because these differences are real and persistent. If you’re filling up 15 gallons and the station a mile away is 20 cents cheaper, that’s $3 saved for a short detour. Over a year of weekly fill-ups, those small differences add up to over $150.