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Gas stations don't make much money on actually selling gas - consumers are irrationally price sensitive when it comes to the price of gasoline, so the stations
by bkjelden 9y ago
Gas stations don't make much money on actually selling gas - consumers are irrationally price sensitive when it comes to the price of gasoline, so the stations are generally selling it at or near cost.
As long as people still pop into the convenience store to get a soda and a candy bar, it doesn't matter if they're filling your tank with gasoline or charging your battery.
- KKKKkkkk1 9y agoHow can the price of gas can be at or near cost, when the difference between two stations across the road from each other can be easily 20%?
- grzm 9y agoCan you provide a concrete example? I can't recall ever seeing such a disparity in the US having lived in the midwest, northwest, and east coast. Perhaps you're in a different location?
- deleted 9y ago[deleted]
- KKKKkkkk1 9y agoBurlingame CA, California Dr @ Broadway. A & A Gas has regular at $2.72, while Chevron is at $3.20.
- grzm 9y agoWow. I wonder what economic factors are at play here.
- niftich 9y agoThe Burlingame A&A is notorious for being the one of the cheapest -- if not the cheapest -- places to fill up between SF and SV. In this case, it's likely that the Chevron literally across the street just decided it's not worth playing that game, hoping instead to appeal to the crowd who wonders if the cheap competitor is actually up to par. The fact that the Chevron gets any business at all seems to validate this strategy at first blush.
- hkmurakami 9y agoAlso the Chevron at grant and el Camino is $3 when the shell a block away on grant is $3.60 or so. The Chevron is one of the highest trafficked gas stations in SV and operates on volume. The shell can't play that game so charges a pronoun to grocery shoppers.
- aianus 9y agoCostco is 20% cheaper than all other stations in Toronto. So either Costco is selling at a loss (unlikely) or there's plenty of profit in gas for gas stations.
- colejohnson66 9y agoOr they buy a lot in bulk when the price is low.
- kspaans 9y agoGiven that you have to pay an annual membership fee to get access to that gas, it's likely subsidized by the fee and used as a loss-leader to bring people to shop at Costco.
- Baeocystin 9y agoCostco does not subsidize its gas sales. It makes money from them: https://www.fastcompany.com/60019/tiger-costcos-tank https://www.fastcompany.com/60019/tiger-costcos-tank It's an older link, but they still do much the same. There have been court cases brought against them by consortiums of other gas stations here and there, but AFAIK Costco has emerged victorious so far.
- dragonwriter 9y agoI've seen it frequently, especially when road configuration makes one station more convenient to, e.g., a freeway on/off-ramp.
- madcaptenor 9y agoThe freeway offramp nearest my house has two gas stations with a ten-cent difference. And wouldn't you know, I use the more expensive one, because it's the one that I can get to without making a bunch of turns.
- niftich 9y agoThere are likely other factors at play. For example, if the more expensive fuel station has brand associations it triggers (e.g. Shell [1]), the higher pricing likely benefits them more so than it hurts, as their target market discerning customer is likely to interpret the price as a proxy for quality. [1] http://www.emeraldinsight.com/doi/full/10.1108/02580540510616656 http://www.emeraldinsight.com/doi/full/10.1108/0258054051061...
- Kluny 9y agoI'm thinking gas stations will stop selling garbage and start selling actual food, since charging takes longer and people will be hanging around for a little while.