As drivers complain about the cost of gasoline, they often bellyache that the price always is cheaper at “that other station.”
Trouble is, that other station is invariably 15 miles away – thus not worth driving to.
But is it really true? Are prices in that nearby town always 10 cents a gallon cheaper?
Yes, they can be.
And no, it’s not some OPEC plot.
The reason is simple: Free-market capitalism.
“There are variations from place to place,” said Ron Planting, an economist with the American Petroleum Institute in Washington.
“Ninety-five percent of the stations are independent businesses,” he said Thursday. “Some may be high-volume stations, some may be low-volume. And, depending on where you are, your rent may be higher in the middle of town.”
Some business operators might franchise well-known names, Planting said, but they still set their own retail price.
And that’s not all. The permutations are as varied as the colors of a rainbow:
• “There are different business arrangements,” Planting said.
“Some retailers have long-term contracts. Others go to the rack – the terminal – and sometimes they get a lower price that way. Sometimes it’s higher. It’s a different business model for retailing and they each have their attractions.”
• Of course, if a big-box store moves in next door, the station might want to lower prices – or be run out of business.
“That type of competition is good for consumers,” Planting said.
• “Another thing that often happens in larger metro areas, there are requirements for (higher cost) reformulated gasoline to improve air quality,” he said.
• Some stations may rely more heavily on gasoline sales for profit because they don’t sell food – that could affect pricing.
• Moving farther afield, prices may fluctuate from state to state.
This can be due to varying state taxes on gasoline, proximity to pipelines and delivery charges.
“The two states that are historically the most expensive are Alaska and Hawaii. Alaska has a low population density,” Planting said, and delivery charges are costly to both states.
Within the same company, prices can vary widely.
Sheetz on Pleasant Valley Boulevard in Altoona, for instance, was charging $2.25 for a gallon of regular Thursday. Fill up at Sheetz in Somerset, instead, and save 6 cents. Pump at the Sheetz at Westwood and pay 4 cents more. That’s a 10-cent spread.
Travis Sheetz, a vice president for the Altoona-based convenience-store chain, attributes price swings within the company to localized competition.
“Costs from store to store are not hugely different,” Sheetz said. The cost of delivering fuel to western Pennsylvania is pretty much a constant store by store.
“What really impacts more is competition. We price on needed profit on the product. But what changes is what our competition is doing. We are committed to be at the lowest retail with our competition,” he said.
Sheetz said that local competition is what causes Sheetz stores that may be just a mile or two apart to have different prices.
He said it wouldn’t really be practicable – or good business sense – to have one price for all Pennsylvania stores.
“If we compete with a store that’s selling below cost, well, we can’t do that across Pennsylvania,” he said.
Sid Haberkorn, owner of Westmont Mobil, knows first hand about competing with Sheetz. There’s one just two blocks away.
He was charging $2.29 Thursday, same as the Sheetz a stone’s-throw away.
Haberkorn tries to peg his price to Sheetz’s whenever possible.
It’s not always easy.
“We had to pay more due to the hurricane two months ago,” he said. “There were times when we made absolutely nothing on gasoline bought with credit cards. Credit card costs were 10 to 16 cents when it was $4 per gallon.”
The nationwide average has dropped $1.94 per gallon to $2.17 since peaking at $4.11 in mid-July, Planting said, quoting AAA stats.
And regardless of the more-minor variations on a local level, gasoline prices overall are expected to fall further in the weeks ahead.
Local News
Related Photos
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The GetGo along North Center Avenue in Somerset was selling regular unleaded for $2.19 a gallon Thursday. Submitted Photo
Discussion
Why do I pay more? Gas costs vary widely from station to station
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