Environmental standards that have been in place in some parts of the country for several years has given the new legislation to input ethanol. In some areas, gasoline was needed to meet higher environmental standards for reducing the amount of smog created by burning gasoline.
Production of this cleaner-burning gasoline caused problems in refining, distribution and storage, which in turn increases the cost of gas. 
On May 15, 2001 John Cook, director of the petroleum division of the DOE’s Energy Information Administration, said before the US House of Representatives Committee on Energy and Commerce that "The result of this targeted approach to air quality has been to create gasoline market islands."
Cook showed California, the Chicago and Milwaukee areas as primary examples of gasoline-market islands. The requirements of clean-burning in each of these areas are unique with respect to that individual area, and there are only a few refineries that can produce the specialized products which are needed.
High demand of products, a supply problem at a refinery or a problem with a pipeline can cause a sudden and a great increase in pricing in these areas. Other states and municipalities also have their own requirements for cleaner fuel.
In California, the rules reformulated by state government for gasoline are stricter than the federally mandated clean-gas laws. In 1996 the requirements were adopted by state of California for cleaner-burning fuel (source: ARB).
For this reason Californians have to pay a higher price for cleaner fuels in addition to this there are, a local sales-and-use tax, the federal excise tax and a state excise tax. If it chooses to obtain gas supplies from those refineries located near the Gulf of Mexico then the distance of California from these refineries can also add to the cost of gasoline.
The Midwest is another area where prices have far exceeded the US national average. Before the rest of the country started using ethanol-blended gas , in 1999, the Midwest region became subject to rules that required the use of ethanol.
Only few refineries outside the region produced this type of reformulated gasoline, this can cause a great increase in demand as compared to supply. This was amongst the many factors that contributes to higher gas prices in the Midwest in the early 2000s. After the national call for ethanol-blended gas in the spring of 2007 the problem emerged again across the United States.
Crude oil inventories have the most biggest effect on gas prices, and the United States depends mostly on foreign oil supplies. The United States imported about 13 million barrels of oil and petroleum products per day, In July 2008, (source: EIA).
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