A few months back somebody was inquiring about how gas prices are set. One of my clients put together this slide show for their employees who were constantly being bombarded with questions about the volatility of gas prices. There are three episodes that go rather fast with more meat in episodes two and three. This is produced by the Marathon Petroleum Company who have a number of refineries and pipelines in the United States (Headquarters is in Findley, Ohio) and they operate Speedway, Super America and Pilot Gas Stations. http://www.mapllc.com/answers/gas_pricing/flash_brochure/episode_1.html
Couple of questions not answered in the slide show: 1. How come prices are stickier coming down than going up? 2. How come there is 10 cents a gallon or more difference between gas stations within 10 miles of each other?
Another question, If it's simply supply and demand, how come the oil company's profits went up to record highs when the price of crude oil went up and the supply was difficult to get? Wouldn't that hurt profit in most businesses?
and another: How come prices increase the moment they announce an upcoming production cut rather than when the cut happens?
I think the answer to a lot of your questions is greed on someones part (and not all gas stations get their petroleum from the same sources). Also, additives are usually put in to the tankers at the terminal based on the customers requirements, no additives is cheaper, more additives more expensive.
Outrageous BOYCOTT the CITGO station on NC 42. I went inside to prepay for my gas with my Visa Check card. Because ,suppossedly, vendors can put a $50 hold on your debit card if you use it as a credit card, I always use mine as debit card. Well the guy behind the counter has the *alls to ask me to use it as a credit card, because he has to pay a fee if I use it as a debit card, so he wouldn't make as much money on the gas! I took my card, got in my car and went across the street to the Shell station.
Can't blame him for asking, you could have said no. The typical gas station only makes pennies on gas sales, the store is where the money is made.
I have always used my debit card as a credit card so I could pay at the pump -- several years now -- and have never had a gas station put a hold on it for more than the amount of my purchase.
I was reading an article that indicated the wholeslae price charged to gas stations in the same city could vary by as much as $0.37 per gallon. That seems to be an excessive range given the local transport costs are going to be the only variable and that far exceeds that ecpectation. I have looked at the gas prices from Myrtle Beach to Wilmington knowing the difference in the state taxes between NC and SC. I can never find a difference in price that approaches the tax difference in adjacent or nearby stations. I wonder why that is since that is the biggest difference in cost through that area in theory.
Market forces? Stations in the higher tax area, that are located close to the lower tax area, would rather make a smaller profit than no profit?
Also, was it an apples to apples comparison? (Same Octane levels, % Ethanol if any, within the same brand, detergents added)
It seemed the opposite, that the stations closer to the higher tax rate were charging more to increase their profit.
Same Octane levels and some the same brand, at least as well as can be determined through an informal study. Given the relatively short distance between the two there are not as many data points as anyone would like. A similar situation can be found on I-95 either north or south as one crosses the border.
What a bunch of BS propaganda that was. The end of Episode 1 makes no sense. Lemons "are" going to be more expensive so the consumer has to pay in advance? So what they are saying, is, the consumer must pay for their investment prior to their purchase of it? All other manufacturers in our system buy base product then take the chance on their end products sale after it's produced. What makes the oil companies so special? If the price of crude drops, and they are selling refined crude purchased at a higher price, do they lower the price at the pump? Let me answer that for them, "NO." Telling me there's only 5 cents at the pump for profit to the vendor may be true for some vendors but I think the majority are on the "what can I get away with" sales concept. They also are trying to insinuate that the purchase of crude this week will produce "this weeks" gasoline. That's BS. Refineries not only stock up on large quantities of crude but they produce a large inventory of seasonally needed products long before the demand occurs. And blaming Government Mandated Gasoline .... That took the cake. Propaganda 101 - If you can throw the blame at the government, an easy target, all people look away from you as the cause. Blaming "boutique fuels" is rediculous. The entire oil industry has only spent approx $100 billion since 1989 to accomodate production of these fuels. The cost was a spit in the bucket yet passed on as a major part of the cost. The real dictator in gasoline prices comes from none other than GREED CENTRAL, the stock market. The impact of the futures markets on gas price is a large factor. Traders in gasoline & crude futures / options significantly impact prices. Your gas price is set more by the guess of future market conditions then by actual supply and demand. And this is where the oil companies want the price controlled. It keeps OPEC in check.
