I was on the other side of town for a meeting today, and noticed something that should put to rest the idea that big oil companies set gas prices. (Senator Schumer, please pay close attention.)
There were two gas stations, both selling Conoco, right next to each other on a major north-south street. One was on the northwest corner, and the other on the southwest corner of the intersection. There was no obvious commuting advantage to one over the other: the side street wasn't terribly busy, and they were both on the same side of the major street.
One was selling gas for 10 cents cheaper than the other. That's a huge difference, especially for the same brand.
There was no obvious difference between the two - both had pay-at-the-pump, both had carwashes - except that the cheaper one also had a small mini-mart, too. Is it possible that the mini-mart made up enough margin that the first one could undercut the second on price to that extent, and so bring in the extra gas business? (Remember, if there isn't some imbalance, either station could always match the other's price.)
In any case, Conoco obviously wasn't setting the prices here.
Comments
The price difference may alos be explained by a difference in fuel delivery dates. The cheaper station may be selling from a delivery two weeks ago, the more expensive from yesterday. The mini-market also may play into it.
Posted by: ech | March 16, 2006 12:20 PM
"In any case, Conoco obviously wasn't setting the prices here."
Don't know if that is true.
I have read that each gas company has maps with areas, some as small as a single gas station, and the wholesale price of the gas depends on the delivery area. This was used to explain exactly the sort of thing you noticed where gas stations across the street from each other had very different prices.
If this is indeed the case, it would be one more reason not to own a gas station. If the gas company decided to always keep your price higher than the stations around you, you could go out of business fast.
I hope someone who really knows this subject posts a comment.
Posted by: Ray A. Rayburn | March 16, 2006 3:53 PM