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?
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Because gas in most places in America is an absolute necessity and there’s no replacement product to compete with it. Sure, you have different brands and even qualities of gas to choose from, but in the end you need gas. So if every gas station in the area decides this is what people will pay for gas, then guess what? That’s what you’re paying for gas. Most of the time, the station selling $0.10 cheaper is still making a hefty profit or it’s Costco and they’re bringing you into their store. You never see gas station prices actually reflect the cost of crude. It would take an awfully high number to even change your driving habits because if you’re like most Americans, you have next to zero access to public transit and if you do have access it’s probably inconvenient and unpleasant in some way.
Almost no other goods are like this. Take food, for example, a thing we need to live some would argue even more than we need gasoline. If you’re buying cereal and Kellogg raises their prices, you could switch to General Mills or store brand. Let’s say all breakfast cereals raised their prices. It is very easy to just stop buying cereal. You could switch to yogurt or eggs. Even if all breakfast type foods raised their prices, you could skip breakfast or eat chicken tenders for breakfast. You have a wide array of competing options including to do without. Not so for gasoline.
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