Why Is Gas So Expensive in Colorado?
Unravel the complex web of factors that drive Colorado's elevated gasoline prices, offering insight into the unique influences.
Gasoline prices fluctuate due to a complex interplay of global, national, and local factors, making it challenging to understand why costs can vary significantly from one region to another. While many elements contribute to the price at the pump across the United States, specific conditions in Colorado can lead to prices that are often higher than the national average or in neighboring states. These conditions encompass the worldwide market for crude oil, the state’s distinct tax structure, the logistical hurdles in fuel supply and infrastructure, and the unique demand and geographic characteristics of the state.
Crude Oil Prices
The price of crude oil represents the largest component of the cost of gasoline, typically accounting for a significant portion of the retail price. Global supply and demand dynamics heavily influence crude oil prices, as fluctuations in either can lead to immediate price changes. For instance, strong global economic performance often increases demand for oil, which can drive prices upward. Conversely, economic slowdowns can reduce demand, potentially leading to lower crude prices.
Geopolitical events also significantly affect crude oil markets, as disruptions in major oil-producing regions can impact supply and introduce market instability. The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, exert considerable influence by coordinating production levels among member countries. When OPEC+ decides to cut oil supply, it often leads to an immediate increase in global oil prices, impacting countries worldwide, including the United States.
Colorado-Specific Taxes and Fees
Colorado imposes several taxes and fees on gasoline that contribute to its overall price at the pump. As of 2025, the state’s gasoline excise tax is $0.22 per gallon. This excise tax is collected from licensed fuel distributors and suppliers, who then pass the cost along to consumers through the retail price. These funds are primarily allocated to the Highway Users Tax Fund (HUTF) to support the maintenance, construction, and improvement of roads and bridges across the state.
Beyond the excise tax, Colorado also implements additional fees that add to the cost of fuel. A notable example is the Road Usage Fee (RUF), which was established under Senate Bill 21-260. This fee is being phased in, and as of July 1, 2025, it is scheduled to increase to 5 cents per gallon. Other specific charges, such as the Environmental Response Surcharge (ERS) and the Perfluoroalkyl and Polyfluoroalkyl Substances (PFAS) fee, also apply to gasoline.
Supply and Infrastructure Challenges
Colorado’s geographic location and existing infrastructure present specific challenges that can elevate gasoline prices. The state has limited in-state petroleum refining capacity, with two refineries located in the Denver area capable of processing approximately 103,000 barrels of crude oil per calendar day. This capacity is substantially less than the state’s demand for refined petroleum products, which is nearly three times greater than its refining output. Consequently, Colorado must rely on refined products transported from other regions, primarily the Gulf Coast and Midwest.
The transportation of refined fuel to Colorado incurs additional costs due to the state’s landlocked position and mountainous terrain. Fuel is typically transported via pipelines, rail, and trucking. While pipelines are generally the most efficient method, the state’s mountainous geography can make pipeline construction and maintenance more complex and costly. Rail and truck transport also add to expenses due to fuel consumption, labor, and the challenges of navigating diverse landscapes, especially to remote or high-altitude areas. Furthermore, certain environmental regulations, such as cleaner fuel requirements in the Denver-Boulder and Fort Collins metropolitan areas, necessitate specific gasoline blends that can increase production costs at refineries.
Demand and Geographic Factors
High demand and Colorado’s unique geography also contribute to elevated gasoline prices. The state has experienced significant population growth, leading to an increasing number of registered vehicles and a natural rise in overall fuel consumption.
In addition to resident demand, Colorado’s robust tourism industry creates seasonal spikes in fuel demand, particularly during peak travel seasons associated with outdoor activities and mountain recreation. The influx of visitors leads to increased gasoline purchases, especially in popular mountain communities where prices can be higher due to limited supply points and increased logistical costs. The dispersed nature of population centers and the necessity of transporting fuel to remote or high-altitude areas further complicates distribution networks. These factors, combined with the higher operational costs for retailers in less accessible locations, result in higher prices at the pump for consumers throughout the state.