Pumped up: Competition, demand drive gas prices
By Tyler Stocks
The Daily Reflector
Saturday, January 12, 2019
With gas prices dropping below $2 in some North Carolina cities, drivers in Greenville are having a hard time understanding why they are paying more to fill up locally.
Prices in the Greenville area on Friday ranged between $2.09 ad $2.18 per gallon and averaged 8-9 cents above the state average of $2.09 per gallon, according to the price-tracking site Gas Buddy.
One person who is unhappy with the price is Renota Petteway. While pumping gas on Wednesday, she said, “I think these (gas prices) are ridiculous and unaffordable.”
On Friday afternoon, Fayetteville drivers were paying $1.86 at several stations; in Princeton the low price was $1.81 and in Raleigh, gas was going for $1.97, GasBuddy reported. Even towns as close as Kinston, Washington and Williamston had prices below $2.
On the other end of the price range, gas was selling for $2.30 a gallon in Black Mountain and Waynesville, and $2.27 in Asheville, the site reported. The statewide average a year ago was $2.40.
A petroleum analyst said there are many factors contributing to the the city’s gasoline costs.
“The difference here when comparing (gas prices) to a bigger area is that Greenville — being a smaller area than Raleigh or Charlotte — tends to have less competition,” GasBuddy Senior Petroleum Analyst Patrick DeHaan said. “That’s what it’s all about when it comes to bringing those low prices in. The more stations there are in an area like Raleigh or Charlotte, the more likelihood there’s gonna be a higher level of competition and that brings down prices quicker.”
DeHaan also said gas stations in Greenville do not have a real incentive to compete with each other and are not looking to undercut competitors.
“Every different city in North Carolina has a slightly different status quo,” DeHaan said. “Some stations will always undercut each other and some stations may just match each other in terms of price. And in areas where stations aren’t kind of at war with each other— if they’re not competing against each other — there’s not really any incentive for them to continue dropping it.”
According to DeHaan, gas is a commodity and like most commodities, can easily be influenced by several factors.
The Daily Reflector reached out to companies like Marathon, the parent company of Speedway, BP, Sheetz, Murphy USA and Harris Teeter for an explanation of why gas prices at their stores in the Greenville market were more than stores in surrounding areas. Murphy USA did not respond to emails or phone calls.
Marathon spokeswoman Stefanie Griffith said many things account for gas prices.
“There are many factors that go into the retail price of gasoline, with the most significant being the price of crude oil, followed by federal, state and local taxes, transportation, and refining,” Griffith said.
“Supply and demand, which is paramount to the price of any product, as well as competition at the local level and driving patterns can drive changes to the prices daily,” Griffith said.
BP’s Southeast Spokesman Michael Abendhoff said he could not provide any information, as all BP stations in the southeast are independently owned and operated.
Sheetz Spokesman Nick Ruffner said, “Sheetz is committed to offering competitive gas prices at each of its 585 store locations. Prices are set in each market based on a number of factors including transportation costs, the price of crude oil and competition in that area.”
Harris Teeter Spokesman Danna Robinson said fuel prices are not determined by one thing, but rather a variety of factors, unique to each local trade area.
“Comparison by market is difficult due to differences in contracts, suppliers, and distribution networks,” Robinson said. “We can share that in our experience, fuel is subject to sudden and drastic change due to supply and demand. Harris Teeter strives to offer the best fuel at the best prices for every market.”
DeHaan said that the gasoline business is not the most lucrative, and said stations can charge what they want depending on several factors unique to their business.
“If (station owners) felt like charging whatever they wanted to, theoretically there could be one of them that charges $20 and one $7 and one $2,” he said. “That’s kind of the reason there’s some truth to that and that’s why prices are so sporadic across the state.
“Ultimately, stations have a lot of leeway in what they want to charge but at the same time, they don’t because they have competition,” DeHaan said. “There are state laws that may prohibit them from charging more than a certain amount. In most cases, they’re trying to make ends meet just like any other business.
“Gasoline is a very cutthroat business,” he said. “Gas stations basically break even. Stations will on average year make about 15 cents a gallon but there are far more lucrative businesses to be in. People look at it as why aren’t stations passing along the decrease but as a business owner, you’re saying, ‘Well I didn’t do very well and I couldn’t afford to lower the price because I got bills to pay and everyone’s cost of doing business are slightly different.’”
DeHaan said that the gas market in Greenville also is not aggressive when it comes to price wars and price leaders.
“I don't see as many aggressive stations in terms of price leaders that bring prices down,” he said. “This could be one of two things. It could be there’s not the level of competition in some of those other areas and it could be the fact that Greenville is a little bit further away from some of those areas as well. When you talk about Charlotte being a little bit closer to South Carolina, they generally compete a little bit more towards South Carolina because South Carolina is so much cheaper in terms of gas taxes.”
According to the American Petroleum Institute, gas taxes in North Carolina are currently 53 cents which are among the highest in the Southeastern United States.
In any case, DeHaan said that while gas stations are making money, their owners are not getting rich.
“They have to make some overhead to pay their employees, property taxes, etc,” he said. “Every gas station out there is setting their price based on what they pay. Some stations may try to get a little more profit, some stations may try to get a bit less. They’re simply passing along increases they are paying or passing along decreases they are getting as well.”
DeHaan said that it’s important to remember that gas is a buyer- and seller-driven market.
“When the economy is doing well, the U.S. consumes more crude oil and when the economy is doing less well, Americans consume less oil, he said. “Any real issue that can affect global supply and demand of oil or refining... a lot of it is set on the strength of the economy.”
Contact Tyler Stocks at email@example.com or 252-329-9566. Follow him on Twitter @TylerstocksGDR