The Effect of Oil Prices on Gas Prices and Consumers
Having been in the car for close to 400 miles this weekend, I had many opportunities to observe local gas prices. The highest I saw was ARCO at $3.59 and the lowest was Chevron at $2.99. Another key observation was the gas stations a block away from that ARCO were charging $3.23 and $3.25. Hmm...
Two questions:
1) Why could I see a difference of $0.60 in gas prices (about 20%) within 100 miles of each other? And see a difference of $0.30 within 1 mile of each other?
2) Why chose the gas station we do?
For question 1, I really want to know whether a given station prices its gas based on some function of current oil prices, or past prices. So when the oil price goes down, does a given station wait until its next order of say, 1000 gallons before it revises the posted price? So in the past week, the rapid price decline would then result in some stations buying fuel at $85 and others at $95 (numbers made up). Therefore, the sale price at the first station would be about 10% lower than the second station.
This makes sense, mostly. My issue is that most stations revise their prices fairly often, but I rarely see tanker trucks. Clearly, the price of the gas under the station may vary dramatically with the posted sale price. Yet why? In the end, the station will charge what the market will bear. Price too high and receive little business. Price too low and lose money.
For question 2, I generally ignore specific gas prices. I spend very little time trying to find the cheapest gas and less worrying about them. In aggregate, I do try to recall that Station A has usually been cheaper than Station B.
It would be reasonable to then see station B (3.23) and think, "Station A will be cheaper". But what do we do when it isn't (3.59)? Are some people simply evaluating that they always use Station A?
Anyway, I'm just happy that gas prices are going down and my poor car managed 38.8 miles / gal this weekend.
Two questions:
1) Why could I see a difference of $0.60 in gas prices (about 20%) within 100 miles of each other? And see a difference of $0.30 within 1 mile of each other?
2) Why chose the gas station we do?
For question 1, I really want to know whether a given station prices its gas based on some function of current oil prices, or past prices. So when the oil price goes down, does a given station wait until its next order of say, 1000 gallons before it revises the posted price? So in the past week, the rapid price decline would then result in some stations buying fuel at $85 and others at $95 (numbers made up). Therefore, the sale price at the first station would be about 10% lower than the second station.
This makes sense, mostly. My issue is that most stations revise their prices fairly often, but I rarely see tanker trucks. Clearly, the price of the gas under the station may vary dramatically with the posted sale price. Yet why? In the end, the station will charge what the market will bear. Price too high and receive little business. Price too low and lose money.
For question 2, I generally ignore specific gas prices. I spend very little time trying to find the cheapest gas and less worrying about them. In aggregate, I do try to recall that Station A has usually been cheaper than Station B.
It would be reasonable to then see station B (3.23) and think, "Station A will be cheaper". But what do we do when it isn't (3.59)? Are some people simply evaluating that they always use Station A?
Anyway, I'm just happy that gas prices are going down and my poor car managed 38.8 miles / gal this weekend.