The Service Side of Gasoline Prices
Driving in Pennsylvania and Massachusetts, I am always amazed by self-service gasoline stations. I come from New Jersey where we are not allowed to pump our own gas. (Oregon is the only other state that, like NJ, has mostly full-service gasoline stations.) When I need to fill my tank, I just ask the attendant to do it. It’s all rather easy and effortless. In New Jersey, most of us want to retain full service.
Economists might disagree.
But first let’s see if self-service fuels high gasoline prices. Then, our last stop is productivity.
In 2020, the price of crude represented 43 percent (below) of the total we pay for a gallon of gas. Because the wholesale price of crude varies, Gulf states like Texas pay less than states along the mid-Atlantic Coast.
Now though, with the price of crude and gasoline soaring, the proportions will be different from 2020. But you get the picture. Crude occupies the biggest slice:
Close to 68¢ per gallon, California remains the U.S. high for state gasoline fees and taxes while Alaska’s 15¢ is the low. At the same time, New Jersey taxes and fees are close to 50¢ and in Oregon, the only other full service state, they are approximately 38¢. (There is also an 18.3¢ per gallon federal gas tax.)
You can see below how state gasoline tax rates tend to cluster. The Gulf states charge us the least:
Then, looking at prices, we could point to recent highs:
However, thinking of inflation, $3.62 in 2012 is the same as $4.53 today. Comparing daily highs, we peaked at $4.11 on July 17, 2008 and yesterday, we were at $4.32. But, accounting for inflation, $5.30 has the same purchasing power today as $4.11 in 2008. So we have not touched the top (yet).
As for New Jersey ($4.38) and Oregon ($4.72), per gallon prices for regular, yesterday, were above the national average.
Our Bottom Line: Productivity
Actually, productivity is the one sure thing we wind up with.
We know that most people around the country are happy pumping their own gas. We also know that our 3.8% unemployment rate signals tight labor markets. In gasoline stations and beyond, scarce labor nudges businesses to become more productive. As a result, if New Jersey approves self-service, then the market can allocate those gas pumping employees elsewhere. They can go to jobs where they create more economic value from land, labor, and capital.
Returning to where we began, it appears tough to determine the impact of full service on New Jersey’s and Oregon’s gasoline prices. However, we can be sure that productivity will rise if the two states switch to self-service.
My sources and more: Politico is a good starting place for learning the history of NJ full-service gasoline and oregonlive.com has the Oregon update. Then, while USA Today had a prices overview, the EIA, the American Petroleum Institute, and the Tax Foundation are my go-to sites for gas and oil data. Also, do take a look at this recent econlife post.
Originally published at https://econlife.com on March 11, 2022.