The good news is that 2019 kicked off with relatively low gas prices. An oversupply of oil on the world market lead to a steady decline in the price of fuel. With the national average gas price at $2.25 at the beginning of January, it’s actually the lowest price since 2016 for this time of year.
The U.S. started to see prices decrease in October, and they've continued to decline slowly since then. Of course, gas prices vary by region, but overall, they are less expensive than they were in 2018.
Many drivers are enjoying these low prices, compared to last summer when gas prices were at their highest rate in four years. Now the question remains, will these low prices continue, and what are the factors which determine the pricing of gas?
There are several factors which affect the price of gasoline, including taxes, distribution, refining and the cost of crude oil. Prices for crude oil, which accounts for the majority of the final price a consumer pays for gasoline, fell dramatically last fall, thanks in part to an increase in U.S. production which lead to an over-supply of oil.
The price of crude oil has been slowly increasing since the beginning of the year, which is starting to push up gas prices. However, overall demand has been low recently, which contributes to the growth in stocks and helps to keep gas prices lower despite the rising crude oil prices.
The national average gas price is currently $2.25, and you can refer to the graphic below for the average price per state as of January 2019.
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You’re probably wondering why gas is so expensive in California ($3.25) versus Oklahoma, which has the lowest price ($1.85)? According to the U.S. Energy Information Administration (EIA):
“In addition to differences in state and local taxes, other factors contribute to regional differences in gasoline prices, including distance from supply, supply disruptions, and retail competition and operating costs.”
To breakdown these factors in more detail:
EIA’s explanation of why gas prices in California are so high:
“California gasoline prices are higher and more variable than prices in other states because relatively few supply sources offer California's unique blend of gasoline outside of the state. California's reformulated gasoline program is more stringent than the federal government's program. In addition to the higher cost of this cleaner fuel, state taxes on gasoline in California are higher than they are in most states.”
California is one of 17 states that use reformulated gasoline (RFG), which is blended to burn more cleanly than conventional gasoline and to reduce smog-forming and toxic pollutants in the air. RFG is required in cities with high smog levels, while it is optional elsewhere. New York, Connecticut, are other states which use RFG, tend to have higher gas prices.
The IRS sets a standard mileage reimbursement rate each year so that employees, contractors, and employers can use it for tax purposes. This rate fluctuates year to year and applies to cars, trucks, and vans. For 2019, that rate 58 cents per mile for business miles driven (up from 54.5 cents in 2018).
However, the federal standard mileage rate is only a recommendation and businesses may reimburse their employees for business mileage at a rate of the employer's choosing. Whether to use the IRS standard rate or a higher/lower rate, could be based on average gas prices in your area. For instance, if you conduct business in a part of the country where gas is more expensive, you might want to increase your rate. If a company chooses to use a rate that exceeds the federal standard, the excess income would be taxable for the employee, which is essential to keep in mind.
Alternatively, if your business operates in a state that has lower gas prices than the national average, you might consider lowering your reimbursement rate. The standard mileage rate is based on shifting national averages, so it is not a one-size-fits-all for different areas of the country.
Whether your employees use the standard IRS rate, your company’s own reimbursement rate, or neither, and they just deduct the actual costs of using their own vehicles, Everlance is the app to use for business mileage tracking, for both companies and those who are self-employed.
Everlance uses GPS to track each drive automatically and calculates the deduction immediately, based on the mileage rate. In addition to monitoring mileage by merely swiping right for business trips and left for personal trips, Everlance also records the mileage and compiles the data into IRS-compliant reports which can be downloaded for employee reimbursement, and sent to your accountant when it’s time to prepare your taxes.
In addition to mileage, you can also keep track of business expenses and revenue.
This means that you can track your entire business financial picture just as quickly as you can track miles. Just take a snapshot of your receipts for tolls, parking, or any other type of expense, and Everlance stores it securely in the cloud. You can even link your credit card or bank account directly to track expenses automatically.
Add convenience and simplicity to your business accounting, and explore how Everlance can save you and your employees a ton of time and hassle when it comes to tax deductions.