DENVER — It’s something drivers see often, neighboring gas stations with noticeably different prices. According to a Denver economics professor, there are several factors behind that reason.
“About 95% of the gas that we use is produced in United States. Only 5% is imported, but that 5% is a large number because we are a large consumer of gasoline,” MSU Denver professor Kishore Kulkarni said.
Kulkarni told Denver7 when the international price of gasoline goes up, the domestic price goes up too.
One of the big factors leading to noticeable price differences among gas stations comes before the gas ever reaches the pump. Different stations may buy from different wholesalers, with different costs to get that fuel there whether it’s coming locally or internationally.
“If the gas is produced locally, then obviously the cost is much lower. They’re getting gas from wholesalers who have different costs for different companies, and that's one of the reasons why they charge different prices,” Kulkarni added.
Once it gets to the station, competition and customer behavior play a factor as well. If a station has fewer competitors, or even a steady stream of customers, it may have more room to charge a little more.
“Where we have fewer gas stations, the price is much higher because they know they have captive consumers there,” Kulkarni said. “Gas stations know that their traffic is not going to diminish if they are right on I-70. There are too many travelers there and they are always in a high demand. So, they start charging a little bit higher,” Kulkarni told Denver7.
Not everyone is looking for the cheapest gas. Some drivers are willing to pay a little more for convenience, rather than drive across the street to save a few cents if they are in a rush.
“If the price difference is not substantial, then you and I we don't care. We say it's $3.55 there, $3.65 here. I'm going to fill up only 10 gallons anyway, so that that does matter how much difference there is,” Kulkarni said.
Brand loyalty can play a role too. Some people have a favorite station or rewards program and stick with it, even if another station nearby is cheaper.
“That preference probably gets them a higher demand by which they internally know that they can charge a little bit higher than others,” Kulkarni said.
Gas stations pay attention to those customer habits when setting their prices.
You may have a good reason to fill up your car on Thursday, August 13. Circle K is offering 40 cents off per gallon. All you have to do is download their rewards app.
