ELI5-How does an individual fuel station in the US decide how much to charge at the pump?


There are obviously state taxes and supply/demand within urban centers to contend with—but is there a basic formula or sorts that gets you to the dollar amount you see per gallon?

In: 5

Most stations are not independently owned and or operated. Therefore, those decisions are typically made at a corporate level and passed down to them to implement.

So the question really becomes how does corporate come to that number? And THAT is usually determined by the usual factors: What the competition is charging, expenses in oil production, delivery, etc.

The equation for the price of gas is the same for any commodity. The cost the fuel is sold to the gas station + taxes + expenses + profit

“According to the U.S. Energy Information Administration, the price of crude oil accounts for about 67 percent of the per-gallon gas price. Another 7 percent is based on the price to refine crude. Distribution and marketing account for 11 percent, and the remaining 15 percent comes from taxes.”

Transportation costs makes a lot of the difference in gas prices from town to town. The further you have to transport the gas to get to the station, the more expensive it is.

Gas taxes nominally are used to pay for the roads, intersections, enforcement, etc

The gas stations themselves actually make more money selling snacks, lottery tickets, Cigarettes and booze (where legal) than from the gas.

There has been a standing poker game at Bob’s QuikFil just outside of Jefferson City Missouri and has been since 1923. When Bob is losing, prices go up. As soon as Bob raises his prices, the 24/7 Mart down the street matches the change and this sets off the chain reaction with every other gas station in the country. If you want gas prices to drop, we need to convince Bob to stop trying to draw an inside straight

Friend of mine was the assistant manager for a gas station/convince store. I’ve been with them multiple times while they walk outside, look at the station down the street to check the price, then call the manager who checks the Gas Buddy price for the nearby QuickTrip, and then the manager decides to either match the place down the street, or go a penny higher or lower.

This is a daily occurrence. The owner of the place owns something like 20 gas stations in the area.