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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I’m failing to see how supply and demand come into play for $4.09 gas and $4.19 gas.
Gas stations are also convience stores. They can sell gas at-cost and make money on people picking up cigarettes while waiting in line. Or they can make an extra 10 cents on the fuel margins.
Its more of a retail strategy question as anything.
Some stations charge based on the actual current price of fuel. Others will charge what they purchased the fuel for meaning that it may have been cheaper than the current price.
Fun fact, in the morning people will drive around and see what other stations prices are and be at or right around the same price.
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
Not sure how you reasoned out that it doesn’t apply to gas, but it definitely does. If I want gas right now and I don’t care what it costs, thats supply and demand. If I care about cost and am willing to drive across town to get it for cheaper, that’s supply and demand. The demand is high because people want convenience for the close one. Demand is lower at the farther away one so that’s why it’s cheaper.
Gas stations purchase their gas from brokers that pre-purchase their oil on the commodities exchanges using a financial tool called futures. A commodity future is a little bit different than a stock option because it has a delivery date when you actually will receive the commodity. This is used to stabilize the sale price of all kinds of goods. A farmer growing oranges will sell his years crop yield to a commodity broker up front. This allows the farmer to have a bad year or use the earnings to invest in his equipment. The same goes for oil. Every step in the supply chain from crude to gas is bought and sold as a promise of future delivery. When a bunch of refineries suddenly believe that crude will be in short supply the price of future gas delivery goes up. The actual stations have very little price setting power. Often a region will only have one gas broker this monopoly power forces all stations to make the call will we sell at a loss or sell at a price near break even.
Something else to think about: I’ve seen operators (especially dealers* who are typically not very sophisticated) that literally don’t know what margin they’re making on a gallon of fuel, or don’t care.
They might not know due to poor reporting systems, and they might not care because they’re pricing for volume or trying to juice their inside sales (as others have mentioned).
*Dealer is a site that doesn’t supply itself; think the Sunoco down the street from you owned by a new American. They have to buy from a wholesaler (or “jobber”) at a markup to cost because they dont have enough volume to run their own loads from a terminal. Often single-site operators. They aren’t gonna have great data compared to your big chains that spend a lot of money on back office / accounting systems.
I think one big thing that makes gas different to eg groceries is that the prices changes so rapidly. In the span of one day the price of gas changes 10 times or more (at least here in Germany). In a supermarket you might have some reduced thibgs for a week but other than that the prices almost dont change.
What this does is that you cannot plan as well. At some point you need gas and most of the time dont want to go out of your way too much so you just go where it fits best. While the trip to the supermarket is more planned.
Now why the gas prices change so rapidly compared to most other things is something I do not understand myself.
I worked for a grocery store and someone left the intranet open on the gas price page. The company was tracking gas prices at every station within a few miles of every store with a gas pump.
This was 20 years ago, I can only imagine that the big players have it all tracked and adjust prices algorithmically.
I don’t understand your question price differences are everywhere even for the same product that’s why corner stores often charge more than Walmart for the exact same product.
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