Why is the gas price so different between nearby stations in the US?

When it comes to the cost of gasoline, there’s no such thing as a one-size-fits-all answer. Prices vary from station to station and even from state to state. As an expat in the US, it really puzzles me because I often see prices differ between 15-20% amongst nearby stations. 

So what’s behind these price discrepancies? And more importantly, how can you find the best deal on gas in your area? Let’s take a closer look.

1. What factors affect gas prices

Gas prices are determined by a wide variety of factors, from the cost of crude oil to local taxes and more. Crude oil is the primary source for gasoline, so when its price rises, so do gas prices. Other key factors include refining costs and transportation expenses associated with getting the fuel from refineries to retail outlets. The amount of taxes and fees imposed on gasoline can also affect the price.

For example, “California has higher gas taxes than the rest of the country. It has some environmental fees from a cap-and-trade program and a low carbon fuel standard. And it uses a cleaner-burning gasoline that costs a little bit more to make.” according to a PBS report

2. Why are gas prices so different between stations in the same area

It may be surprising to learn that 60% of the retail gas stations in the US are owned by an individual or a family that owns a single store. So if there is such heavy competition, why would the gas price fluctuate so widely between stations in the same area? A rational consumer will surely choose to pump gas at a lower-price station?

Location is especially important when it comes to the pricing since station owners must factor in their transportation costs. The closer a station is to the refinery, the less expensive it will be for them to get the fuel. Business owners may also set prices based on competition and market conditions.

Also, if they offer other services/products, they may purposely lower the margin on gas and try to make it back from other sales. 

3. How can you find the best deal on gasoline

The best way to find the lowest price is to shop around. Gas prices vary from station to station and even from day to day, so it pays to keep your eyes peeled for good deals. You might also consider signing up for gas reward programs offered by certain stations, as they may provide special discounts. 

GasBuddy is a good program that lets you check out the gas price of nearby stations. 

Alternatively, if you live in California, Costco gas stations can be a good option too. The gas price is often at least 10% or even 20% cheaper than in other stations. 

If you want to get a deeper dive into the gas price in the US, listen to this Odd Lots podcast “What Actually Determines the Price of a Gallon of Gas.”

Last but not least, I recently created a group on Facebook called Asian Expats in the US so that we can share/discuss more tips directly. Feel free to join.


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