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Fuzzy Fuel Marketing Math

Why does one retailer sell gas for one price in one town, and another price somewhere else?Would you like to know? Good luck. Would you like some help dealing with it? Here's an idea.


I've been struggling with how to begin a post about fuel prices; it's kind of like writing about death and taxes. We all know that gasoline prices are high, and that a lot of it has to do with imported oil, production challenges, and speculation. I struggled with how to explore the issue from a more local perspective, where it makes sense to the consumer that has to deal with it every day.

When I lived in Colorado, I often passed by two competing convenience stores that were on opposite corners of the same busy intersection. While they sold the same brand name of gasoline, the price for regular would often differ as much as 12, and as high as 24, cents per gallon on any given day. No one would provide a straight answer as to why, and the local media bristled at the suggestion that they weren't doing enough to find out. 

Perhaps it's not really surprising that these price disparities exist at different stores, but what about a chain of outlets that are all owned by the same company?

In the attached photo gallery, I've documented prices at several different GetGo outlets - these are owned in part by Giant Eagle, whose parent is the Kroger Company in Cincinnati. They also own the King Soopers and City Market grocery chains in Colorado. On this particular day, a 10 cent price swing existed between the Moon, Leetsdale, and Ohio Township stores.  

I can also personally attest to a consistent, 4-to-6 cent price difference between the GetGo outlets in Wilkinsburg and Edgewood (Regent Square), and the store in Squirrel Hill, at Forward and Murray Avenues. These stores are all within 2 miles of each other - why should gas cost more on one side of the Squirrel Hill Tunnel than the other?

GetGo's website has links to convenient apps and pages for mobile devices, to show what the price of gas is for outlets that are close to your location, or where you live or work. This app will only show one store at a time, however - comparison requires a lot of back and forth. 

GetGo is a popular location for gas because of their Foodperks and Fuelperks promotions, which tie discounts on gas to grocery purchases, and vice versa. I've found, however, that I can often get better deals on groceries at other stores, and in the wake of the high cost of fuel I've been cognizant of better prices at other places, such as warehouse clubs, where the price difference exceeds the occasional Fuelperks discount. If you had a 10-cent Fuelperks discount on March 22, however, it would have gone a lot further in Ohio Township than it would have in Moon.

Of course, these practices and observations are dependent upon one's individual circumstances and preferences. For me, brand loyalty is often overrated.

Giant Eagle media relations staff did not return calls this week seeking comment about their gas pricing. A few weeks ago, I spoke with a representative of Roberts Communications, a PR firm under contract to Giant Eagle, who stated that the company would not discuss either their marketing practices or market areas for gasoline.

As it seems to be happening in so many areas of our lives, the Internet is facilitating the ability of the consumer to make more informed choices. Fortunately, there appears to be an independent resource for this type of information in the form of Gasbuddy.com, which enables consumer members to report gas prices so that many can potentially benefit.  

This information is available for the Pittsburgh area at Pittsburghgasprices.com. Their mobile app will provide available price information for your geographic location. There are some drawbacks, though - no one is posting price information for the stations in Ambridge. Might just have to do that. 

A representative of the site was also willing to shed a little bit of light about the nature of gasoline pricing on a  more local basis. According to Gasbuddy's Gregg Laskoski, the following factors influence what we pay at the local pumps:

Taxes - There's a map online that shows the disparity between states. New York - whew. When driving cross country on I-70, I always know to fill up in Missouri. 

Sales Volume - Another factor, along with how much gasoline sales make up the actual profit a store makes from selling "convenience" items at "convenience" (read exorbitant) prices. 

Wholesaler - Gas stations buy their gas from a wholesale dealer - when the station takes delivery of a fresh load of gas, and how much they paid the wholesaler for it, will obviously affect the price. GetGo is owned in part by Guttmann Oil of Belle Vernon, Pa. - how does the use of a sole source wholesaler affect the price in different geographic areas? How should it?

Local Market Trends - Often as inscrutable as the wind, but sometimes predictable. In general, the closer you get to an airport, the higher the gas prices get. Is that in response to higher business costs, businessmen returning rental cars, or a perceived sense that those who need gas in this area can afford to pay more or will not care as much if they do? Then again, how does this explain that gas prices across the county line in Ambridge are comparable with airport-area stations, and nearly a dime more than just down the road in Leetsdale?

Applicable Law - Some states have laws that prevent retail outlets from selling items below cost to attract customers to buy other things from them - the so-called loss leader strategy. Pennsylvania is one such state - the Pa. Unfair Sales Act was pointed to by many retailers in response to the GetGo Fuelperks discounts, and warehouse clubs such as Sam's and Costco may be exempt because they restrict sales to their members only.

The Gasbuddy folks also keep a close watch on past trends and potential future developments that could affect gas prices across a region, or across the US and Canada. One such potential development is the threatened closure of a Philadelphia gasoline refinery that could negatively impact supplies, and therefore prices, across the northeast U.S., including the Pittsburgh region. 

It was reported today that there could be as many as 4 interested parties in purchasing this refinery, which could definitely help keep prices at their current unreasonable level, or keep their unreasonableness from multiplying more unreasonably than already anticipated.

Does it make sense to drive across the county for cheap gas? I don't think so. For my car,  a 10-cent per gallon savings is $1.50 - does that justify driving an extra 20 miles, or burning nearly a gallon of gas, to get that savings?

Most of us remain too involved in the day-to-day business of living to get too deep into the subtleties and complications that surround the oil business, or any other attempt to profit from the procurement and marketing of fossil fuels. All we can hope to do is make sure that we can find what we need at the most reasonable price we can, without going to unreasonable lengths. 

Perhaps it's not too much to ask of our "neighborhood" gas retailers to show some consistency in how they price their product, or at least be more up front and honest about what factors impact the prices they set. 

But before you set your sights on that clerk behind the counter, think twice - the answers, and those who can provide them, are somewhere else entirely.

Have a great month ahead.

 

The opinions expressed in this weblog are solely my own as an individual and private citizen, and do not represent the opinion or policy of my family, my employer, or any other private or public entity.

johnlinko.blogspot.com

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

John Linko April 11, 2012 at 08:16 PM
John Shumway of KDKA has cast some light on some cheaper prices, and the reasons why. East Liverpool is about a 30 mile drive from Sewickley one way. Depending on your MPG and the size of your fuel tank, it may or may not make sense to go that far for cheaper gas. In any event, the media coverage and explanation are a good thing. http://pittsburgh.cbslocal.com/2012/04/10/gas-prices-cheaper-in-ohio/
Larissa Dudkiewicz April 12, 2012 at 01:47 PM
When I lived in Ohio and worked in Pennsylvania, gas was ALWAYS cheaper in Ohio and I never understood why. I would fill up at home and if I needed gas in PA, I would only buy just enough to get me to Ohio.

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