Why do most goods have relatively stable prices, while gasoline fluctuates on a daily basis?
In: Economics
Because most gas stations operate on incredibly small profit margins for the sale of their fuel, an average of 1.7 percent. This is due to the fundamental nature of the fuel market. Gasoline is a commodity, whose composition is strictly regulated by the government, so one can’t market the difference in the *quality* of your fuel (not that this stops Chevron from trying). The only basis on which gas stations can compete is location and price, and in most markets, there’s more than enough nearby competition to drive down prices to the bare minimum required to stay in business.
So, where do Gas stations make their money? In the little convenience stores attached to them. The margin on that Gatorade you’re buying is somewhere around 50%. In effect, the gas is sold at or below market cost to attract customers to the other services the gas station offers, like a Door-buster deal on Black Friday, or a printer or game console.
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