How do the oil companies set retail gasoline prices?

[dumbcat]

What's the calculation?

How does a gas station owner decide what price to charge? Cost plus some percentage? Whatever he feels like? What his customers tell him to?

[JT45242]

1. Greed and limited competition

When I worked at a convenience store we called in the gas prices of the three other gas stations within a block of us at 9, 12, 3 and 9 every day to a regional manager.

We were then told what price to put up. It was one cent lower than the station catty corner to us as long as the other two were equal or above that.

So...if you wanted to collude it was really easy.

[MineralMan]

2. Oil companies set the price the local distributors pay

for the fuel. The local distributors set the price their gas station customers pay. The gas stations or their franchise owners set the price the consumer pays.

The local stations or franchise owners keep in mind both the cost of the gasoline they already have bought, along with their prediction about the price they will be paying for the next load delivered to their storage tanks. They also weigh the price being charged by other stations in their area.

In most states, it is illegal for station owners to sell gasoline for less than they pay for it. That is to prevent predatory price wars, like the ones that used to take place before such laws went into effect.

Bottom line: There is no net profit for individual gas stations from the sale of gasoline. Their profits come from the convenience store attached to the station. In earlier times, a gas station's profits came from selling tires, accessories, and services.

The one rule almost all stations follow is: "The price on the pump must be high enough to pay for your next load of gasoline." That is why the moment someone announces that fuel prices are going up, gas stations raise their prices, even though they paid less for the fuel they already have in the tanks. They have to, because they must pay for the next load when it is delivered.

Running an independent gas station is a very iffy way to make a living. That's why there are so few independent stations left. Most stations are franchises tied to a gasoline brand franchise owner.

[mopinko]

3. by colluding.

[Kaleva]

4. Local stations set the price

There are two Holiday stations near me that are about 30 miles apart. There's over a 30 cent difference in price per gallon. Same regional brand. Big difference in price.

In a nearby town, there's a .40 cent difference in price between lowest and highest. These gas stations are within 6 miles of each other.

[yellowdogintexas]

5. we have a2 local station here which is consistently 6 to 10 cents higher

than everyone else. A friend of mine says he has done that for years and years.

We have had a lot of fun speculating how he actually makes money. Possibilities include: drugs, illegal slot machines and running a numbers game. The station is in a prime location and would do a gang busters business if prices were lower.

The station is between 2 QT stations, one of which is at a very convenient exit about 2 miles up the highway. Their gas is always cheaper. If I were someone passing through and needed gas, I would be very unhappy if I bought it from him then passed that QT five minutes after I filled up at the Price Gouger Express.

[Bow To The Robots]

6. Econ 101

NB: What the market will bear + wholesale = retail.