Gas prices vary—but why?
As cost continues drop, competition brings disparity to pumps
The price per gallon of unleaded gasoline is in retreat, but one lingering question continues to nag Rio Grande Valley consumers: Why is there such a price disparity between pumps?
The simplest answer is competition, according to Michelle Foss, chief energy economist at the Jackson School of Geo Sciences at the University of Texas at Austin.
"If you went shopping for a pair of Nikes, wouldn't you find different prices in different places?" Foss asked. "Of course, you would. Variability in price, that's what markets do."
That leaves it up to shoppers to find the best price.
On Tuesday, the price per gallon at certain Valero stations in Brownsville were $2.21 and $2.17 at others.
The only difference was that some were Corner Store Valero and the others were Stripes.
"I don't know why, but it's a competition," said the manager of a Corner Store Valero in Brownsville about the differing prices per gallon.
Of course, there are a variety of factors that influence the cost of gasoline within a community and across state lines.
Although the national average is approximately $2.89, prices in the Valley have dropped as low as $2 in some places.
The apparent explanation is the Valley's proximity to Gulf Coast refiners.
"If you go to the end of the pipeline, you get much higher prices," said Mark Cooper, director of research for the Consumer Federation of America.
Communities along the Gulf Coast and near refiners can typically expect lower gas prices as the cost of transportation is lower and competition among wholesalers is higher.
The equation is an easy one to make. The closer the service station is to the distribution centers, the cheaper gas will be at the pump.
"It's really as simple as that," Cooper added.
To find out what accounts for the disparity on the local level would require a bit more legwork.
The variables might include the cost of labor and land, insurance, who the supplier is, who the wholesaler is, and how far the product has to travel to market.
However, the station manager is unlikely to divulge information because most would consider it part of their competitive advantage, Foss said.
"Gas is no different than any other good you go out there and shop for in a very competitive market," Foss said. "It's not rocket science, it's Marketing 101."
