Dueling stations
Unraveling the mystery of gasoline pricing.
Tuesday, August 7, 2007
With the needle leaning toward “E,” it’s sometimes hard to think too long about being thrifty when looking for a place to fill up on gas. But a little forethought can save a few pennies — and who couldn’t use more of that at the pump these days?
For example, if heading west out of downtown Little Rock, think about stopping at University Avenue and 12th Street, where the Shell station recently was advertising regular unleaded at $2.73 a gallon. That’s as opposed to the Shell on Broadway near Seventh Street, which advertised $2.85, or two Chenal Parkway locations topping $2.80.
In fact, prices differ all over the metro area. Both among and within cities like Benton, Sherwood, Cabot and Conway, gas seems unable to achieve regularity.
Why the disparity? After all, most gas in central Arkansas ultimately comes from the same Gulf Coast refineries, and it’s all subject to the same state and federal taxes (about 40 cents a gallon). So why should two stations on the opposite side of town — or even opposite sides of the street, as was the case last week at North Hills and McCain boulevards in North Little Rock — offer two different prices?
The answer is fairly complicated but generally boils down to an individual station’s chosen markup. At only a few pennies, it’s the smallest part of the cost of gasoline, but that small part makes all the difference.
According to the Energy Information Administration, an independent, statistical analysis arm of the federal Department of Energy, the bulk of what we pay for gas goes to the cost of crude oil, which is used to produce gasoline. The rest goes to cover costs in refining, distributing and marketing the product, as well as to taxes.
The smaller the geographic area, the more similar these costs become. So the difference in price for consumers generally reflects the decision of an individual station owner, who may or may not be making the same profit as his competition since different fuel companies use different additive packages in their gasoline, each at a different cost, according to the Energy Information Administration.
Mark Thompson, an economic forecaster with the University of Arkansas at Little Rock’s Institute for Economic Advancement, said that such “minor differences of cents” aren’t all that significant in the gas market.
“These differences are very often ... [indicative of] demand for gas at a particular location,” he said.
Whereas a consumer paying cash might be more discriminating, those carrying a gas card issued by a particular company may shop at that company — even if the gas there costs two cents more a gallon — just for the convenience of using plastic.
Certain differences in price, even in the same town, also are often attributable to location. A highly visible station on the interstate can generally charge more than one buried deeper in town, for example.
Ultimately, competition will determine if the higher price is sustainable, Thompson said. So while it may be odd to see two different prices across the street from each other, that’s really a rarity. Consider Maumelle Boulevard, where the Valero between Interstate 430 and the city limits of Maumelle was charging $2.80 last week. The Shell station only a couple blocks up the street was offering the same price — as was the EZ Mart in the middle of town.
But in those instances where differences persist, is it worth it to drive out of the way to save? Well, that depends upon the consumer. After all, even a savings of 10 cents a gallon will rarely add up to more than a dollar or two for the average gas buyer, so figuring out if it’s worth a long drive often means taking note of your average gas mileage and comparing the cost of driving to a cheaper station to the potential savings that can be had there.
To help you plan, go to www.syncweekly.com. You can view the average price of gasoline in the metro, as well as the actual prices being advertised by individual gas stations in specific cities within Sync’s area of circulation. The chart will tell you whether the current price is more than, less than or the same as it was the day before.
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