why do gas prices change every day?
In: Economics
Because gasoline is a commodity product whose formulation is strictly regulated by the state, typically by the Department of Weights and Measures, which tests purity and ensures you’re getting what you paid for. So, if everyone has to sell an identical product to the public, all they can compete on is price. This drives gas station profit margins down quite low. So, when the price they pay to the refiners increases, they have no choice but to pass that onto the consumers, you and me. Likewise, when prices drop, they tend to drop together as they compete for each other’s business. If a gas station location shows consistent high margins, it’s likely that a new station will be built to compete with it, and gain access to an prime location. New apps like Gas Buddy also add additional downward pressure from competition as it permits frugal drivers to plan their fill-ups around the least expensive gas station along their route.
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