Why Are Gas Prices in Illinois So High?

Gas prices in Illinois frequently draw attention for being higher than in many other parts of the country. Numerous factors contribute to the cost of gasoline, and in Illinois, a combination of state-specific policies, regional market dynamics, and broader economic forces converge to influence pump prices. Understanding these elements helps explain why fueling up in Illinois can often feel more expensive.

Illinois-Specific Taxes and Fees

Illinois imposes a combination of taxes and fees on gasoline. The state motor fuel tax, an excise tax, has climbed to 47 cents per gallon as of July 1, 2024, due to automatic annual adjustments tied to inflation. This indexing mechanism ensures the tax rate continues to rise without requiring new legislative votes.

Beyond the per-gallon excise tax, Illinois also applies a sales tax to gasoline purchases, a practice that differentiates it from many other states that exempt fuel from sales tax. The basic state sales tax rate is 6.25 percent. This sales tax is calculated on the total retail price, which includes the motor fuel excise tax, effectively creating a “tax-on-tax” situation for consumers. The Illinois Department of Revenue establishes this sales tax rate twice a year based on the average selling price of motor fuel.

Illinois also levies additional state-level environmental fees. These include an underground storage tank tax of 0.3 cents per gallon and an environmental impact fee of 0.8 cents per gallon, which are added to the fuel price. The environmental impact fee, specifically, is $60 per 7,500 gallons of fuel sold or used in Illinois. These fees support environmental programs and maintenance of storage infrastructure.

Local jurisdictions within Illinois can further increase the total tax burden. Many counties and cities have the authority to impose their own motor fuel taxes or additional sales taxes. For instance, Cook County adds an extra 6 cents per gallon, and Chicago imposes an additional 8 cents per gallon. Some counties, such as DuPage, Kane, Lake, and McHenry, can levy a county motor fuel tax between 4 and 8 cents per gallon, with these rates also subject to inflation adjustments. These localized taxes contribute to the significant variation in prices seen across different areas of the state.

Refinery Operations and Regional Supply

The regional refining capacity and infrastructure within the Midwest directly influence gasoline prices in Illinois. This region relies on a network of refineries and pipelines for its fuel supply. Refineries process significant crude volumes to meet regional demand.

Refinery maintenance shutdowns can significantly disrupt this regional supply. These periodic shutdowns are necessary for equipment inspection, repair, and upgrades to ensure safe and efficient operations. Unexpected outages, such as a power failure at a major refinery, can instantly reduce the available fuel supply in the region, leading to immediate price increases. For example, an unplanned outage at BP’s Whiting, Indiana refinery impacted regional prices.

The transportation of refined fuel to Illinois largely depends on pipelines. Any disruptions or capacity constraints in these pipelines can create supply bottlenecks, further pushing up prices. While the Midwest generally produces enough petroleum products to meet its demand, disruptions can necessitate importing fuel from other regions. This reliance on external supply during shortages adds to transportation costs and, consequently, to retail prices.

Illinois can be particularly susceptible to supply shocks because of its reliance on regional refineries and the interconnected pipeline system. When a refinery serving this area experiences issues, the immediate reduction in local supply can cause more pronounced price spikes compared to regions with more diverse supply chains. The efficiency and reliability of this regional supply chain are therefore direct determinants of gasoline prices.

Specialized Fuel Blends and Environmental Mandates

Environmental regulations significantly impact gasoline prices in Illinois, particularly in the Chicago metropolitan area, due to mandates for specialized fuel blends. The federal Clean Air Act introduced the reformulated gasoline (RFG) program, which requires gasoline to be blended to burn more cleanly and reduce pollutants. RFG is mandated in cities with high smog levels.

Producing these specialized blends is more complex and costly for refineries than conventional gasoline. For instance, Chicago requires a unique blend that mandates a lower vapor pressure to reduce evaporation and smog, especially during warmer months. This blend also calls for heavy use of corn-based ethanol, partly due to Illinois’s status as a major corn producer.

The limited number of refineries capable of producing these specific blends can create supply bottlenecks. If one of these specialized refineries experiences an outage or maintenance issue, the disruption can disproportionately affect the supply and price of RFG. This creates a less flexible market, where supply issues in a few key facilities can have widespread price implications for mandated areas.

Seasonal variations in fuel blends also play a role in price fluctuations. Refineries switch from producing cheaper “winter-blend” gasoline to more expensive “summer-blend” gasoline. This transition period, typically occurring in spring, can lead to temporary price increases as supply adjusts. The complexities of making summer-blend fuel can add around 15 cents per gallon to the price.

Broader Market Influences

Global crude oil prices represent the primary influence on gasoline prices across all markets, including Illinois. Crude oil is the raw material for gasoline, and its cost is the single largest component of the price at the pump. Geopolitical events, decisions by organizations such as OPEC+, and the overall balance of global crude oil supply and demand directly affect these prices. For instance, production cuts by OPEC+ can tighten global supplies and drive up crude costs.

National refinery utilization rates also play a significant role. When U.S. refineries operate at high capacities, it indicates strong demand for refined products. However, if utilization rates decline due to widespread maintenance or unplanned shutdowns across the country, it can create a bottleneck in the supply chain, pushing up gasoline prices regardless of crude oil movements.

Transportation costs from refineries to gas stations within Illinois contribute to the final retail price. While pipelines are the most cost-efficient method for long-distance transport of refined products, other modes like trucking are also utilized for local distribution. These freight and trucking expenses are ultimately passed on to consumers.

Finally, the retail markup and operational costs for gas stations factor into the price seen at the pump. These costs include labor, utilities, equipment maintenance, and other overhead associated with running a retail fueling business. While the profit margin on gasoline itself can be relatively small for stations, these operational expenses must be covered through the overall pricing structure.