Before the massive run-up of gas prices it seems to me that there was a much greater variation from station to station in gas prices.
Now, however, allowing for some variation it seems prices are remarkably similar. I have a 70 mile, one way, commute and prices don’t seem to vary much throughout the trip. They even seem to change in lockstep.
Any reason (WAG or otherwise) for this or am I hallucinating?
At the retail level, you almost have a perfect market. The retailers are getting their supplies for pretty much the same price (from the same supplier in many cases), there are alternative retail outlets (often right next door), and the customer has complete price information (posted on the big sign out in front).
Given that people will go some distance to shave a couple of cents per gallon off the price, it makes sense that retailers will cut their margin to the bone to ensure that they are as close as possible to the others. Anyone who is significantly higher than their neighbors will lose market share. Anyone who significantly undercuts their neighbor will lose money.
Generally there is some geographic variation in pricing, based on the cost of transport, etc., but, whenever you have a cluster of gas stations, the pricing will be within a few cents per gallon of each other. (A station which is more interested in fixing cars than selling gas may keep their prices relatively high.)
Note that this says nothing about the state of competition at the wholesale level, which is a whole other kettle of fish.
I’ve noticed that the gas stations close to where I live tend to be much more expensive (15 to 20 cents per gallon) than ones elsewhere in my city when prices are steady or falling, but more in line when prices are rising. This has been the case for many years.
I suspect it’s in response to people being more likely to shop around when the prices are rising and less likely when they are falling.
WAG:
Station A has some overhead that forces them to sell gas at 10 cents over the price of station B. When gas was $1 a gallon, 10 cents was a lot. Now that gas is $4 a gallon, 10 cents doesn’t look that bad.
Plus when gas was cheap, people didn’t care much and would go to the more expensive station for whatever frills they had to offer. Now that people is hurting, they just want the cheapest and the frills are no longer selling gas. That makes the stations cut the frills and be more uniform.
I think that **bikebloke’s **area may not be typical. I drove two miles yesterday and saw prices that varied over a range of about $.30. The OP does not quantify the variation, but that seems to me to be about the same or somewhat more variation than I saw two years ago.
I do not think this is accurate. An article in the Washington Post a couple of months ago went into detail about how the retailers were paradoxically suffering in this market. The big oil companies exercise chokehold control over the retail franchise gas stations by very granular market analysis. The retailers are most definitely *not *getting their supplies at the same price. Exxon might charge one retailer $3.90 a gallon, and another one $4.10 a gallon when the two are a mile apart. If they determine that a retailer could charge more based on the demand in that neighborhood then they raise the wholesale price to take their (big) piece of the pie.
There was a case in the DC area just a few days ago where a station’s owner was saying that she was losing thousands of dollars because the oil company (I don’t remember which one) raised her wholesale price to something like $4.70 :eek: after Hurricane Ike, claiming that they got their oil from Texas.
Yeah, it doesn’t seem like that where I live. No hard and current figures but its a constant topic of conversation with my wife concerning price variation in our area.
One of my brothers owns a few major brand gas stations (well, to be precise, he owns a few car washes - selling gas is a side venture of the car wash industry). They literally have employees peering at local competitors’ signs through binoculars to see what they’re charging, and adjust their prices accordingly. One of his manager’s jobs is to figure out how low they can price match (or undercut) without losing “too much” money for the shift, and how high they can go without driving customers away. They may move the price multiple times a day, as the Other Guy moves his price in response. Once a day or so, and employee drives a couple of miles over to check the price over there.
If we assume that these patchworks of “bidding wars” overlap somewhat, we can see why the price changes slowly over miles instead of blocks. Usually. When it doesn’t, it’s because someone has gotten too close or under their wholesale price and has to accept a loss - either in money or sales.
It’s a fungible commodity.
The other major factor which affects gas station prices is the local market. A gas station that’s right next to the interstate will usually charge a few cents more per gallon, since they figure they can still sell all their gas and will make a little extra profit on the deal. On the other hand, country gas stations wil often charge less, because the owners want to attract people from further away. They may advertise cheap fuel with huge signs to get a leg up on the competition.
Isn’t that illegal?
Is it? Why? (I have no idea, to be honest. All the information I have is from a chat over Christmas dinner with my bro. He mimes an excellent binocular snoop, by the way.)
For the very reason you mention; so that a fuel station can’t keep raising their prices all day. It may be a state/local law, though.
I was wondering this on the way to work this morning; there is a gas station that has a “happy hour” on Thursdays, where they lower the price by about $0.30 between 4 and 6 PM (and the beer prices, too). I think that’s okay, as long as they don’t raise the price in the morning.
I guess I still don’t get it. Why would adjusting prices (down as much as up, I might add) be okay once a day or once a week but not several times a day? I could see why it might be *annoying *- if I saw the gas station on my way to work and made a mental note that gas was $4.10/gal and I should get some on the way home, and then on the way home it was $4.20 - but illegal?
I haven’t seen the price delta between stations change very much due to the run up in prices. There does seem to be a major variation by station type, though. Near me is a corner with a Chevron and 76 station, whose prices move in lockstep. Next to the 76 station is a QuickStop whose prices is always five to ten cents less than the others. It is a pain to use, though, which might explain why some people would prefer the brand name ones. One block away is a Valero station which is lower than the Chevron and higher than the Quickstop. Where I work, 18 miles away, the prices are a lot higher than where I live.
You are looking for a rational reason, and the basic fact is that there just plain isn’t one. The theory (which is a much too intellectual term for this) is that anyone who raises prices after a disasters is trying to profit from misfortune or something. Of course, they are responding to basic supply/demand factors, and are likely helping to make sure more resources come in.
True. Story of my life. (See the Username!)
Now that makes a little more sense, but doesn’t seem applicable to your run of the mill Thursday afternoon. I could see an “anti-gouging” regulation in, say, an area which has applied for disaster relief funds or something. That has at least a whiff of logic to it.
So is this actually a law anywhere? Either a specific to misfortune one or one in effect all the time?