Right now the going rate for gas in my city is around $3.20 for regular unleaded. I just passed two different no-name mom & pop convenience store stations that are selling it for $3.09. How do they do that? Is it really gas they’re selling or gas mixed with cheap beer? You might say, “Well, they make their money off groceries, candy, beer, and lottery tickets,” but people can buy that stuff at the big chains, too.
It must be very hard to make a decent living owning a convenience store.
It would have to be very cheap beer indeed to cost less than $3.20/gal (~ 30 cents per 12-oz can).
The markup on much of what they sell is impressive.
A friend of mine had a gas station many years ago. It is a very difficult business and he ended up getting completely out of it after a while.
There isn’t much of a profit margin on the gas (according to my friend). You get a much better profit on the store items. You also have to factor in the cost of the land. The big name guys will often locate their store on prime real estate, which allows them to get good traffic, but also costs a lot more. The mom and pop type stores are often located in places where the land is a lot cheaper, but then they aren’t in such ideal places to get customer traffic either. The lower real estate costs do sometimes allow them to have cheaper gas, though. They may have lower operating costs by having family members operate the store as well, where a big chain will have managers and cashiers that they have to pay a salary to.
The little mom and pop store might also be forced to sell the gas at close to zero profit just to get traffic to their store, something the bigger chain may not be willing to do. But that may be the only way that the little guy can generate enough traffic to stay in business. In my friend’s store, he said that the gasoline alone wasn’t worth it to stay in business. There just wasn’t enough money in it.
They do it the same way as how they sell other no-name items cheaply. If I want a quality item quickly, I’ll resign myself to stopping at 7-Eleven. But I can easily get a 6-ounce package of fairly edible cookies for just 50 cents at the Mom-and-Pop.
Also: The little guys spend zero on advertising. I wonder how much of the budget goes to that at the Big Name gas stations.
These are independent stations that are not linked to a particular supplier. Many filling stations are run on a franchise-like business model whereby a local operator obtains a franchise from a particular oil company but is obliged to get his supplies from this company. Independent stations, on the other hand, are not restricted in the choice of their suppliers. The gas they sell usually comes from one of the major oil companies as well, simply because there is not much gas on the market that does not come from them, but they are free to shop around and get their supplies from various sources depending on which is the cheapest at a particular moment.
Plus, the independent no-names don’t have to pay franchise fees.
Well, yeah, but presumably the gas at the mom & pop is less different from the gas at Shell than the Brand X cookie is from the Little Debbie cookie.
I figured the gas had to come from the same place. I mean, you can bake up Little Debbie knock-offs in your kitchen, but you can’t very well make knock-off gas that will run in a car.
That makes sense.
Eleven cents isn’t a very large gap when it comes to retail gas prices. If you drive around a little you’re likely to see similar prices with the big names too. Also, could the mom and pop be advertising 10% ethanol gas? It’s usually ten cents less than 100% gas, at least around here.
As a truck driver in the UK I used to be a regular customer at a filling station where the diesel was a lot cheaper than Shell, BP or whatever. They also gave free stuff according to how much you bought. A full tank would get you a free meal.
The reason they could do it was partly because they had a huge storage capacity. The station had been a franchise selling petrol and diesel. These guys only sold diesel and had installed extra storage tanks. This enabled them to buy their fuel at the spot price when it was cheap, and take delivery.
They had a permanent queue of trucks day and night at the pumps.
None of the big name stations are currently selling it that low.
They don’t have those where I live. All stations in town charge the same amount, within a penny or two per gallon.
Are they in the same location as the big name stores? I’m guessing not. Most gas is priced by location.
How specifically do you mean location? Texas not like the east coast where there are small towns and villages strung together a few miles apart between big cities. Here when you drive out of one town or large city, you might go 30 or 40 miles before you get to another town.
According to GasBuddy.com, in the last 24 hours in Dallas, the price of a gallon of regular gas ranged from a low of $2.93 to a high of $3.69.
Are the ranges in price across town not this wide in other places? It’s routine here, and people consult web sites and apps to locate the cheapest gas in the city on any given day.
Just checked Houston’s gas prices. The range was a low of $2.82 to a high of $3.89. That’s a $1.07 difference between high and low.
Soooo… it’s not like that outside the Great Nation of Texas (which remains great in spite of Ted Cruz’ attempts to make us all look like idiots)?
There’s variability in the Chicago area, as well. Gas prices in the city proper are quite a bit higher than in the suburbs (and Cook County prices tend to be higher than in the outer counties); that’s due, in large part, to local taxes.
Beyond that, you also tend to see differences by chain/brand. Shell and BP tend to be higher than nearby stations with the smaller brands.
The location difference can be something as small as one station is right off the highway exit and the other is a couple of miles down the road.
And there are other issues ,too. I’ve known a couple of places that weren’t really interested in selling gas- their main business was repairs and the gas was a sideline.
These small family operated gas stations mostly are already owned and don’t need to pay a mortgage or don’t have a business credit.
They can buy their fuel on the open market and are not bound to a contract or payment to the chain.
Mostly have the gas station is a side line business to gain customers to their actual business; convenience, restaurant, tyre, mechanics or other services.
Most independent gas stations buy their gas on the spot market, which costs whatever the price of gas is today. Most franchised gas stations get their gas from the oil company which buys on the futures market. Thus the franchised gas stations are protected from a huge sudden run up in the price of gas, and can plan their expenses much better. Occasionally there is more supply or less demand than predicted and the spot price is significantly cheaper and the independent can charge much less.
At least where I live, independent stations generally have worse locations and have to attract value shoppers, so it is mostly market segmentation.
Retail gas prices are set by the local station owners, usually based on what their nearby competitors sell their gas for.
Combine that with probably the cheapest additive package they can find, and the independents have a little more room to price things competitively.
The actual gasoline itself is fungible; all stations buy from a handful of terminals in an area, and it’s not uncommon for one branded station to actually have gasoline from a competitor’s refinery in their tanks with their own specific additives added to it. So your “Shell” gas may actually be refined by Citgo, but with Shell specific additives in it.