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If your business model depends on having a steady supply of oranges, and the replacement cost for your next shipment of oranges is going to be higher, you're going to raise the price of the oranges you have on hand now to help cover that added cost.
And no, it doesn't take long for a wholesaler to make a series of calls (or more likely these days, to send a mass e-mail) to the retailers notifying them of an incipient price increase. And since all of the retailers are working with the same slim profit margin on gasoline (5 to 10 cents per gallon, usually closer to 5 cents), all of the retailers are going to be raising their prices by about the same amount, at close to the same moment in time, which is going to be about three minutes after they get the notice about the price increase.
The reason most retailers are raising their prices by roughly the same amount is because they have similar overhead, which requires most of them to raise their prices by roughly the same amount to enable them to buy the next load of gas and still cover their overhead. The retailers with really high overhead costs got shaken out of the business pretty early on, of course, about the time they tried to cover that high overhead by selling gas for $3.29/gallon when all their competitors only had to raise their price to $2.89/gallon.
Anyway...if you're running a retail gasoline operation, you know how much you have to charge to make a profit. It's usually about the same thing the guy on the next block is having to charge, which is the same as what the guy around the corner has to charge. The reason? Everybody's got roughly the same costs. So the amount they have to charge for gasoline is going to be about the same.
The retailers (all of them) want to keep their gas prices as low as they can because they know having gas for sale brings you in the door to buy stuff they can actually make some profit on. To the extent the retailers could be said to be "colluding," then they're doing so by supplying gasoline at the lowest price they possibly can (without going broke) so that you'll stop in and buy something else that actually has a markup.
For instance...coffee. We think nothing of paying $1.29 for a 16-oz cup of coffee at a convenience store. That comes out to a cost per gallon of $10.32. However, at $2.79/gallon, you could buy 3.7 gallons of gasoline instead of that gallon of coffee.
Wanna really get cheesed off? You will once you realize that the cost of the ingredients in that $10.32 gallon of coffee is about 30 cents, for a markup of about 3400%. And that's why the retailer has the cheap gas prices out front...to get you to come in and buy his overpriced coffee. Suppose you needed to buy some eye drops at the same convenience store. One popular brand costs about $17.00 per ounce at the pharmacy, so let's call it about $19.00/ounce at your local Stop-N-Rob. Your per gallon cost for eyedrops at the convenience store comes out to about $2,432.00.
Now, don't you feel better about your local gas prices, which are spiraling downward as we speak? Of course you do. I knew that you would.
They DO have similar overhead. But not the exact same. That is impossible.
And they DO have similar small profit margins; but not the exact same. You yourself said "five to ten cents". Then why are they charging the EXACT same, to the penny? Wouldn't you think there would at least be a two or three cent difference?
Either they are pricing the product on a)replacement cost or b)the amount of profit required on the gas that they have already bought and is in the tanks. Posters her ague that it must be A. So when the price of a barrel of oil rises, then they HAVE to raise prices immediately. But then why don't they immediately drop the price at the pump when the price of a barrel drops? They are going to be buying their replacement gas next week at a lower price. So they can immediately drop the price TODAY.......n'est ce pas?
But it never works that way....lol. Cake and eat it too.
(Everything above applies to not only the retailers, but many of other other ten or twelve levels of the industry).
By the way, prices are not "spiraling downward" here. Price per barrel has dropped from roughly $70 to $55 over the last few weeks. That's over a 20% drop. Price at the pump here has gone from $2.92 to $2.82........roughly 3 or 4%.
They DO have similar overhead. But not the exact same. That is impossible.
And they DO have similar small profit margins; but not the exact same. You yourself said "five to ten cents". Then why are they charging the EXACT same, to the penny? Wouldn't you think there would at least be a two or three cent difference?
I think it's a case of the retailers knowing what they can charge at any given time. With gasoline, the answer tends to be the same for all retailers in a given area, hence the absence of a marked variance in pricing as you're seeing in your area.
Quote:
Originally Posted by maineguy8888
Either they are pricing the product on a)replacement cost or b)the amount of profit required on the gas that they have already bought and is in the tanks. Posters her ague that it must be A. So when the price of a barrel of oil rises, then they HAVE to raise prices immediately. But then why don't they immediately drop the price at the pump when the price of a barrel drops? They are going to be buying their replacement gas next week at a lower price. So they can immediately drop the price TODAY.......n'est ce pas?
But it never works that way....lol. Cake and eat it too.
(Everything above applies to not only the retailers, but many of other other ten or twelve levels of the industry).
It's actually a combination of A and B. The batch of gasoline you have in your tanks today cost you $2.75/gallon from the wholesaler. You're selling it for $2.85/gallon so you can make a profit. It doesn't make economic sense to drop the price on that batch of gas, since you'd be losing money. But you can always drop the price on the next batch, which may cost you less than the one you have on hand.
Quote:
Originally Posted by maineguy8888
By the way, prices are not "spiraling downward" here. Price per barrel has dropped from roughly $70 to $55 over the last few weeks. That's over a 20% drop. Price at the pump here has gone from $2.92 to $2.82........roughly 3 or 4%.
Then you are in the wrong place to be buying gasoline, I guess. Here in Southeast Texas it is possible to find unleaded for under $2.20/gallon, down from $2.65/gallon last month. Local gas prices are not merely, spiraling downward...yea, they are veritably hurtling downward, like a 16-lb bowling ball dropped in a vacuum chamber. Gee...it sure is too bad you're getting left out of all of the fun. But there's a salient reason.
You see...as we observed earlier, Caribou, ME, is at the very end of the distribution chain. Because of its extraordinary distance from any other known point on the Earth, it costs more to get a gallon of gasoline to Caribou, ME, than just about anywhere else, other than Pitcairn Island in the South Pacific. Your retail gasoline costs would have to be higher than anybody else's, just because you are at the very end of the road when it comes gasoline delivery. Shipping gasoline to Caribou, ME, is only a tad less expensive than shipping it to Antarctica. However, whether you live in Antarctica or Caribou, ME, if you want gasoline, the American petroleum industry can provide it.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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Quote:
Originally Posted by mathjak107
We just dropped again , just paid 2.73
Our prices dropped too, just in time for the Thanksgiving travel - I'll stop on the way home from work and fill up for just $2.99 - back under $3 again!
I think it's a case of the retailers knowing what they can charge at any given time. With gasoline, the answer tends to be the same for all retailers in a given area, hence the absence of a marked variance in pricing as you're seeing in your area.
But that premise isn't even true. As of yesterday there was a 30¢/gal spread across northern Maine among stations with prices reported to Gasbuddy. Even in the tiny hamlet of Caribou there's currently a 9¢/gal spread. But when you point these things out to him he just ignores them and pretends like this information was never presented. That's how invested he is in his hatred for people who work in an industry he hates.
But that premise isn't even true. As of yesterday there was a 30¢/gal spread across northern Maine among stations with prices reported to Gasbuddy. Even in the tiny hamlet of Caribou there's currently a 9¢/gal spread. But when you point these things out to him he just ignores them and pretends like this information was never presented. That's how invested he is in his hatred for people who work in an industry he hates.
Gas buddy is usually pretty good, but who am I going to believe---them or my lying eyes?? lol
(Drove by every gas station in town today, and I do so almost every day).
Gas buddy is usually pretty good, but who am I going to believe---them or my lying eyes?? lol
(Drove by every gas station in town today, and I do so almost every day).
Everybody priced the same.
Gas retailers in a competitive market, all with the same inventory costs, the same labor costs, fixed costs within 1 to 2% of each other...and they all sell gas for roughly the same price.
Tell us again...exactly what about this situation do you find surprising?
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