May 21, 2022

Botu Linum

The Car & Automotive Devotees

1 intersection, 2 gas stations: Here’s why price of gas can vary so greatly

4 min read

We’ve all seen it, especially in the past week: You pull up to an intersection and find that the price of gas at one station is remarkably lower than the price of gas at another. Sometimes, as much as 20 or 30 cents lower.

It makes you wonder: Is one owner greedy — or just lacking in basic business skills?

Sal Risalvato. (File photo)

Sal Risalvato, the executive director of the New Jersey Gasoline, C-Store, Automotive Association, said neither is the case.

A lot of factors determine the price of gas, Risalvato said. And, during times of high volatility — which we’ve obviously been experiencing — the public has been seeing it play out in real time.

That certainly was true Sunday afternoon.

A quick drive around Morris County found prices ranged from as low as $4.15 a gallon to as much as $4.69. Two locations of the same brand differed in price by 32 cents — even though they were just a half-mile from each other. Two intersections had stations with price differences of at least 20 cents.

Risalvato said he isn’t surprised. It’s a reflection of the volatility in the market, he said.

“The wholesale price of gas has gone up and down in the last week by as much as 60 cents a gallon,” he said. “I know people — and my heart bleeds for them — that took a delivery on one day and then, the next day, the price was down 25 cents.”

That’s a huge problem. Owners not only can’t sell gas for less than they paid for it because it would mean a loss, the practice of doing so is against the law — a law intended to prevent businesses from undercutting competition until the competition went out of business.

ROI-NJ recently talked with Risalvato about the wild rise in gas prices since Russia invaded Ukraine — and the U.S. and most of the world imposed sanctions on Russia, one of the largest producers of oil in the world.

Here’s a look at the conversation, edited for space and clarity:

ROI-NJ: Let’s start with the basics. How often does a gas station get a gas delivery?

Sal Risalvato: That depends. I have members who get gas twice a day, some who get it twice a week and some who get it twice a month. It depends on how busy they are.

ROI: How big is a delivery?

SR: The standard tank is 8,850 gallons. Unless there’s diesel fuel in it. Diesel fuel is heavier, so, then, it could be down to 8,700 gallons.

ROI: Does everyone pay the same price for gas?

SR: When you’re talking about the major suppliers, Exxon, Mobil, BP, Shell, Texaco — the basic price essentially is the same. One may be a penny more than the others, but that can change every day. But that’s not the biggest thing that determines price.

ROI: What is?

SR: The contract with the supplier. Depending on when the owner signed it, they could be paying pennies more per gallon than the station across the street. And, if their supplier owns the station, and they’re just leasing it, they may be paying dealer tank wagon price — which means they have to pay whatever the supplier says. That could be 10 or 15 cents more. So, it’s not unusual for two stations of the same brand to have different prices. But that’s during normal times.

ROI: What is it like now?

SR: Now the biggest differentiator is when you bought your gas. Like I said, the price has been going up and down all week. So, if you bought your gas on a day when the price went up 15 cents and the station across the street got theirs the day before, they are going to be cheaper — and there’s nothing you can do about it, because it’s against the law to sell for less than you bought it.

I can tell you that if there is a big difference right now, it’s almost certainly because of the price the (station) paid for the product that is in the ground.

ROI: That makes sense … for this week. But everyone knows that some stations always are higher than other stations. How do you account for that?

SR: If there are great differences, that means that the management of that location has made a decision that the market at that location will bear a higher price — and feels that they can then get a higher margin. In all likelihood, they will sell less gas, but their business model is, ‘Sell less gas, make more on every gallon.’ Whereas, other locations say, ‘Let me lower the price, I’m going to be more competitive and sell more gas.’

ROI: When will we get back to those days?

SR: Right now, it is so volatile that there’s no place for the market to settle. But it will settle. Anytime this happens, it always settles. When that will be, no one knows. But until it does, you’ll continue to see great discrepancies in prices.

1 intersection, 2 gas stations: Here’s why price of gas can vary so greatly