It seems to me that when prices rise and fall the same amount, almost to the penny, at all of the stations, this would be an indication of price fixing yet no one has ever (as far as I can tell) done anything in that direction. Is it not price fixing? Or, if it is, why isn’t someone suing hell out of the gas companies?
You look out the window of your station and see the guy across the street is selling 2 cents less than you. What do you do?
Actually, it’s more that all the stations around here went up 20 cents overnight, and then another 10 cents. I could see two stations wanting to compete for customers, but when I look on Gas Buddy and see that all of the stations in a 10 mile radius have jacked their prices the same amount on the same day, that’s when I wonder about price fixing.
Why wouldn’t the price of a fungible commodity rise and fall at the same time at all the different retailers? They’re all buying it on the same market. (And IIRC, they buy the gas when you pump it, with the gas in the tank below the pumps still being owned by the distributor.)
Are they all buying in on the same market? If so, why was I able to buy it for 60 cents a gallon cheaper at Costco, as opposed the the Shell and Mobil less than a mile away? Why is the ARCO across the street from the Mobil always 15 cents cheaper?
The wholesale price that the individual stations are buying the gas for isn’t going to be that different. Unless you’re in a really big city, it’s likely all coming from a single refinery or pipeline terminal. The different brands have different additive packages and such, but they don’t have their own separate supply chains.
The pricing decision the individual stations make is how much to mark up the gas. For example Costco purportedly sells it near (or possibly below) cost to lure people into the stores, whereas a Shell or Mobil might feel its [del]advertising[/del] additives justify a higher markup. When the world petroleum markets shift, the wholesale cost goes up but the markup doesn’t so it makes sense that everyone goes up or down by about the same amount.
OK. This doesn’t affect other businesses, that their wholesale prices are all essentially the same?
And because the price of what the stations already have in their underground tanks can change overnight, that is why they all change at the same time?
Most items are priced similarly at different stores.
I was at one station that called another to find out their prices. I asked about this and the cashier said they do it all the time and they like to keep their prices about 5cents lower or something. But she also indicated that the other station knows who is asking and why.
Commodity markets differ from other markets. Regular unleaded gasoline trades on a commodity futures market. It can be seen on this link. The first price listed is the front month. At the time I am typing this it is for June 2015. This means that a gallon of unleaded gasoline for June 2015 delivery costs that much. Add your federal and local taxes, costs for various additives, and a transportation charge to get it to your specific retail gasoline station and that is the price you will see at the pump plus a very small mark up. Retail gasoline stations typically are not owned by the oil companies. It may have an Exxon sign on it, but Exxon almost certainly doesn’t own it. The gas station owner probably makes close to nothing selling the gasoline. They make all of their money on the stuff sold in the convenience store.
It is very likely that all retail stations in the same area will be priced very similarly. Additives may differ slightly. The day that they buy their inventory may differ a little. They may have a slightly different deal from their distributor. They may mark it up slightly different. Add it all up and they may differ by $0.10 or so (usually less). Some gas stations in high trafficked areas are most likely to charge higher markups. Having said all of that, the vast majority of their cost is identical, so why wouldn’t the end retail price be almost identical.
The biggest differences you will see will be based around taxes and proximity to the refineries. You’ll see a big difference in gasoline sold in Chicago versus gasoline sold in Lafayette. You won’t see a big difference in gasoline sold on one side of the street versus another.
See that’s the part I don’t get. I can pay a hugely inflated price for jeans, or I can buy them for $40. I assume the manufacturers get denim for the same wholesale price? Or not?
Soooo, it is the fault of the commodity futures market? If you say yes, I’ll have to quit because that’s beyond my ability to understand! 
I’ve seen jeans with vastly different quality of denim. Also, you pay for the name on the butt.
Pretty much although I wouldn’t term it like that. Gasoline is a commodity, so it is priced like a commodity. Do you expect the price of corn to differ drastically from one grocery store to another one in the same town? When the commodity price goes up/down it goes up/down for everyone. It’s an identical product.
If you’re a baker and the cost of flour goes up, all the bakers in town have to raise their prices or they lose money.
If your bakery is 50 miles further from the grain/flour terminal than everyone else’s, you’re going to show a price differential due to transport cost.
If you sell lots of things and have a bakery onsite besides, you can charge a lower price for bread just to bring in more customers with the smell of cheap fresh bread (loss leader).
If there’s a bakery right next to your bakery, it’s easier to just price match each other tacitly without collusion than to start a price war that neither can win but would destroy everyone’s profits. It’s not a crime to charge what other people charge.
You sort of answered your own question here. You can understand why wholesale prices might be the same for an underlying product. I’m sure you understand that different jean manufacturers add more or less value to the raw denim than others. There is a huge value add differential between different jean brands (real or potentially just perceived). Gasoline isn’t like that. The value add for a gas station is just in the distribution. You’re essentially buying a raw product. Gasoline stations are really just distributing the gasoline in a more or less unimproved, raw form. These retail gasoline stations don’t charge much for that service because it helps bring customers in for their real business: selling chips, candy, and drinks in the convenience store.
Yes, I remember just after BP’s bad behavior polluted the Gulf with oil, and many people refused to buy at FP stations – but that hurt local retailers (and their employees) much more than it hurt BP.
This is becoming less true now, since many/most stations now accept pay-at-the-pump credit/debit cards – many of those customers never go inside the store at all. So some gas retailers are increasing their prices a bit to cover this. But they can’t raise them too much, lest they get out of line with prices at other stations.
Stations are also trying to recover this by selling their customers to advertisers – they install blaring TV screens in the pumps to push advertising while customers are pumping their gas.
I haven’t seen it yet, but I expect that eventually some stations will offer a discounted price for paying inside, or offer discounts like 3¢ per gallon off with a $5 purchase.
One local grocery chain had an arrangement with a local chain of gas stations – the grocery cash registers printed coupons that gave discounts on gas at those gas stations – but you had to take the coupons and pay inside. Customer complaints led to them eventually having coupons that could be used at the pump without going inside. But this whole campaign seemed to die out not long after that – I suspect that the gas stations found it was no longer worthwhile for them.
The price spread here is about 30/40 cents per gallon among all of the stations with Arco/Costco being the cheapest and Chevron/Shell being the most expensive. Right now the spread is $2.68-$3.14 for regular unleaded. There is an intersection not far from here where an Arco station is kitty corner across from a Shell station. The Arco station is always 30 cents a gallon cheaper.
All gas here comes from the same tank farm, piped in using the same pipeline, from the same oil refinery, shipped aboard the same oil tanker from the Alaskan oil fields.
Chevron has a deal with Safeway that you can earn points to get you 20 cents off a gallon. I used it for a while (it was done at the pump) until Chevron’s prices over 20 cents a gallon more than the nearby competition.