Gas Prices: Why the differences?

Have you ever wondered about the discrepancies in gas prices, even among the same oil company on the same block? If it’s the same company, why are the prices not uniform across board. If you are like me which I hope not, you are probably looking for the best gas for your bucks.

What baffles me the most is that gas is significantly expensive in lower socioeconomic areas. This defies economics’ law of supply and demand as well as the relative term.

Factors affecting gas prices

Gas prices are dependent on a few factors. The main factors are:

  1. Crude oil prices. This prices fluctuate depending on speculations, OPEC news and/or instability in any of its members.
  2. Taxes; federal, state and local.

Retail gasoline prices tend to be higher the farther it is sold from the source of supply: ports, refineries, and pipeline and blending terminals. –

US Energy Information Administration (EIA)

(3). Marketing done by both the gas company and the gas station owner

(4) Weather. This is a factor I had never considered would impact oil prices. “The general rule of thumb is mild weather = lower prices, extreme weather = higher prices. …”

Other factors include:

(1). the location (land/rent/mortgage). If the gas station is located in a higher socioeconomic area, we assume that land/rent/mortgage in that area will be high. The gas station owner will therefore factor a higher percentage into the cost of the gas from his/her station. The reverse is equally the same; lower socioeconomic areas should factor a lower percentage into their gas prices.

(2). Ownership. Some gas stations are corporately-owned by the gas companies, while some are independently-owned by individuals with the money, land, and desires.

(3). the margin the corporate gives to owners; this is determined by negotiations and other variables.

(4) other competitors in the surrounding area.

. . .

Now you know what you’re getting (feeding your car) next time you drive around looking for the best gas for your bucks.

Still with all the variables, some local gas prices does not seem to make any business sense. But as entrepreneurs, we charge the price we feel is right for us and leave the customer to decide whether to buy or leave it. My two cents 😊

References:

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