When the price on the sign at your local gas station jumps, it is easy to blame the station owner. But most of what you pay goes somewhere else — and in 2026 the biggest share starts in the oil markets shaken by the Iran war. Here is a simple breakdown of what makes up the price of a gallon of regular gasoline in the United States, based on data from the U.S. Energy Information Administration (EIA).
Where your money goes (EIA, May 2026)
- Crude oil: about 52%
- Refining costs and profits: about 22%
- Distribution and marketing: about 15%
- Taxes: about 12%
- Average retail price that month: $4.48 a gallon. The weekly U.S. average was $4.28 for the week of Oct. 19, 2026.
1. Crude oil: the biggest piece
About half the price of gasoline is the cost of the crude oil it is made from. Crude is traded globally, so prices move with world events. In 2026 the near-closure of the Strait of Hormuz, which carried about a fifth of the world’s oil, pushed Brent crude above $100 a barrel. A rough rule of thumb used by analysts: every $1 change in the price of a barrel of crude eventually moves gasoline by about 2.4 cents a gallon, since a barrel holds 42 gallons.
2. Refining: turning crude into gasoline
Refineries heat and separate crude oil into gasoline, diesel, jet fuel and other products. Refining costs and margins make up roughly a fifth of the pump price, but they can swing sharply when refineries shut down for maintenance or hurricanes, or when demand rises in summer. States that require special fuel blends, such as California, often pay more because fewer refineries make those blends.
3. Distribution and marketing
After refining, gasoline moves through pipelines, terminals and tanker trucks to gas stations. This share also covers the station’s operating costs and profit. Station owners usually earn only a few cents per gallon on fuel — they make much of their money inside the convenience store.
4. Taxes
The federal gasoline tax is 18.4 cents per gallon and has not changed since 1993. State taxes and fees vary widely, from relatively low rates in states such as Alaska and Georgia to much higher combined taxes in states such as California, Illinois and Pennsylvania. Taxes are a fixed number of cents per gallon in most states, so their share of the price shrinks when crude prices rise.
Why gas prices differ so much by state
On Oct. 8, 2026, California’s average was $6.34 a gallon, while Ohio’s was $3.71, according to AAA. The gap comes from a combination of state taxes, special fuel blends, environmental programs, distance from refineries and local competition. West Coast states are also more isolated from the large refinery hubs on the Gulf Coast.
“Rockets and feathers”: why prices fall slowly
Drivers often notice that gas prices shoot up quickly when crude rises but drift down slowly when it falls. Economists call this “rockets and feathers.” Explanations include stations protecting margins after periods of losses, and the time it takes for cheaper crude to work its way through the supply chain. That means even if a deal reopens Hormuz, pump prices may take weeks to fully follow oil lower.
What to watch next
- Any agreement between the U.S. and Iran to reopen the Strait of Hormuz (latest).
- Attacks on Saudi oil infrastructure and the East-West pipeline.
- Seasonal demand: winter-blend gasoline is cheaper to make and usually eases prices in the fall.
Frequently asked questions
What percentage of gas prices is crude oil?
About half. EIA data for May 2026 put crude oil at about 52% of the retail price of regular gasoline.
How much is the federal gas tax?
18.4 cents per gallon for gasoline, unchanged since 1993. States add their own taxes and fees.
Why is gas so expensive in California?
Higher state taxes and fees, a special cleaner-burning fuel blend made by a limited number of refineries, and environmental program costs all add to California’s prices.
Information current as of late October 2026.
