Utah’s gas prices used to trend at or below the national average, but in recent years Utahns have been paying more at the pump.
Gov. Spencer Cox requested a report to look into what’s driving that trend and how to fix it. The results were released Thursday.
“After seeing historic gasoline prices across the country and that Utah’s prices were trending higher than the national average, it became clear that we needed a deeper understanding of the petroleum supply chain in Utah,” Cox said in a statement.
A large part of the problem is that Utah companies are selling gas to places with higher gas prices, driving up local costs, according to the report by the Utah Office of Energy Development.
Meanwhile, Utah’s fuel tax has an “inflationary trigger,” the report said, so the price is scheduled to go up by another 4.5 cents per gallon in January 2023. The current rate of 31.9 cents per gallon would rise to 36.4 cents per gallon. (Fuel tax is calculated to the tenth of a cent in the report to match how gas prices are typically calculated at the pump.)
Cox promised, though, to “continue working with policymakers and industry to find ways to increase supply and reduce prices,” he said.
Though the report describes itself as “a working draft,” it offers at least three likely reasons Utahns are paying more at the pump.
1. We’re selling gas to the West Coast.
“West Coast demand for Utah refined products has increased,” the report says.
That’s because that region and the Intermountain West have closed some refineries and converted others to the production of biofuels, which have lower yields. Those forms, like ethanol, also still need to be mixed with gasoline.
Utah has five oil refineries and two pipelines for refined oil — one to Las Vegas, Nevada, and one to Spokane, Washington. The state exported 40% of its refined oil in 2017 and 2019, and 30% for 2020 and 2021, the report said.
Companies typically send oil from places with lower gas prices to those with higher prices, the report said. In Utah that turns out to put customers at a disadvantage. Utah oil gets sold in areas with higher prices, reducing the local supply and driving up local costs.
2. There is rising demand.
Demand for oil has steadily crept up for more than 60 years, the report said.
Utah’s population increased 18.4% in the past 10 years, while its gasoline consumption rose 22%, driving up costs through demand.
But the state’s supply of oil is not going to change. On top of oil being an inherently nonrenewable resource — one that will run out — Utah refineries can’t handle storing any more. So any extra that is drilled in the Beehive State would be sold out of state anyway.
3. Utah experiences summer spikes.
Gasoline is in higher demand in summer time and that causes a spike in costs.
On average, Americans pay .56 cents more per gallon due to this seasonal change, but the demand for oil causes Utahns to suffer a .90 cent peak in pricing — one of the highest in the nation.
The report suggests that the state could combat some of the seasonal price change by encouraging refineries to stock up on gasoline for summer during the winter, which sees lower demand. Those changes to “fund efforts to store it with the intention of releasing that supply in summer months” when prices are high would help.
Leto Sapunar is a Report for America corps member covering business accountability and sustainability for The Salt Lake Tribune. Your donation to match our RFA grant helps keep him writing stories like this one; please consider making a tax-deductible gift of any amount today by clicking here.
