Why do supply and demand not seem to apply with gas stations, with such varying prices and “that really cheap place!” phenomena?

Question

I have never, ever understood this. Gas is for the most part is a simple commodity. Sure, some prefer a premium brand (like Shell) to a cheaper one (like ARCO), but I can’t for the life of me figure out why there is such a wide variance even within a single mile or two of a city (and amongst the same brand!) I would think that supply and demand would reign supreme here. It’s the same stuff.

You get that one gas station that charges $0.10 less than all the others in the area and the lines are out to the street.

So where are supply and demand?

In: 38

Answer 1

They do apply, but supply and demand are not the only factors. In most countries, there are heavy regulations on the oil market (that includes gas stations), these regulations create other market pressures that are more powerful than supply and demand. Some places, like Brazil, there are laws that stablish a range of price for the gas at gas stations, so we do see some variation here, but only 10 or 20 cents