Competition. It's a simple word, yet a very complex word that covers many angles when it comes to how gasoline prices are determined. It seems so easy to explain, but don't let that trick you--it's incredibly difficult to explain and adequately understand. Say you're on a Sunday afternoon drive, and notice a gas station near you charging $3.50. Down the road a few miles, that price could easily be 10 or more cents higher or lower. The question is "how" or "why" is that? Think of it this way. Are you more likely to get a better deal on a car if there are two similar car dealers next to each other? Perhaps, because the dealers are too close. Say there is a third similar car dealer miles away. Is he going to be at the same level of competition and sell his cars for the same price as the two dealers next to each other? Likely not. He may charge more or less. Maybe people don't know there are two other dealers down the road. Maybe the dealer is almost outside of the city and the land value isn't as high, so his taxes aren't as high. These situations do take place at gas stations. And more factors can impact what a station will charge. Timing can greatly impact what price a station charges as well! Many motorists fail to realize that the price a station pays for gasoline changes daily. If one station gets lucky and buys gas on Monday and the cost goes up Tuesday, the station that bought on Monday doesn't necessarily have to raise prices like the station that bought on Tuesday. Maybe the station that got caught buying for a higher price on Tuesday will pass that higher cost on by raising its gas price. Perhaps the difference is what brand the station is---branded stations usually pay a slightly higher cost for their gasoline. In return for paying a higher cost, those stations are guaranteed first supply in case of emergency situations. Independent stations don't pay as much, but aren't guaranteed supply. While competition sounds easy to understand, there are always a large number of factors that could influence what one station charges. Keep in mind how many variables there are next time you fill up. What could be the best title for the passage?
How Competition Impacts Gas Prices Gas Prices Go Up or Down Competition---a Very Complex Word We Can't Stress Enough the Need for Competition