November 3, 2016

Pain at the Pump in New Jersey

SMITH BRAIN TRUST — New Jersey motorists rushed to fill their tanks on Monday before the state boosted its gasoline tax by 23 cents per gallon. Now, instead of charging the second-lowest rate in the country, New Jersey has jumped into the top 10 with its neighbors, Pennsylvania and New York. Despite commodity prices for light crude, U.S. gas prices ranged from a low of $1.93 in Oklahoma to a high of $2.91 in Hawaii on Nov. 3, 2016. Professor Charles E. Olson, a former energy industry executive now at the University of Maryland's Robert H. Smith School of Business, says state taxes are a big reason for the variance.

Another factor is access to refineries, which convert crude into usable products. Olson says local prices spike when the nearest refinery goes down because importing gasoline from other markets is expensive without pipelines already in place. "There’s a transportation cost," he says, "and that pushes up the price."

A third factor is environmental policy, which affects places such as California. "California has strict air quality requirements," Olson says. "They won’t allow gasoline to be sold if it doesn’t meet certain specifications, which contributes to shortages."



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About the University of Maryland's Robert H. Smith School of Business

The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and flex MBA, executive MBA, online MBA, business master’s, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.

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