By Stephen Smoot
For some, it serves as a frustration. For others, it feels more like a game of finding the best value. For almost all it’s a mystery why gas stations in different towns, and sometimes even the same town have different pricing. What sets gasoline prices for an individual shop, a chain, or in a local area?
Aggravation turns into resentment when the same communities see much higher prices than others. For well over a year of more, gasoline prices in Franklin, Moorefield, and Petersburg have hovered around $3.19 and $3.29. In the Keyser area, prices have stayed in the $2.80s and $2.90s in New Creek, while gas stations closer to and in the city of Keyser charge significantly more.
One could categorize factors that contribute to why gasoline prices are what they are into two categories.
“Macro” reasons reflect the global economy and how the federal and state governments each have myriad regulations governing gasoline at all stages of production and distribution. A number of states have differing laws with California’s being the most notorious in bringing the people of its state extra cost per gallon.
The United States Energy Information Administration explains how global, national, and even state actions affect the prices each person pays for gasoline. It explains the movement of the average cost of gasoline in the United States as a baseline and, in general, serves as the nonpartisan statistical and analytical branch of the U.S. Department of Energy
Four major factors go into the national gasoline price average — the cost of crude oil, the cost of refining it into gasoline, marketing and distribution costs, and taxes charged at every level.
As an example, the U.S. EIA offers a comparison between the price of gasoline between 2014 and 2023, when gasoline averaged $2.85 a gallon, and 2023 itself when the average rocketed to $3.52 a gallon.
Between 2014 and 2023, refining costs made up 15.3 percent of the price, but that leapt to 18.7 percent in 2023. Companies spent 15.1 percent on distribution and marketing between 2014 and 2023, but 14.3 percent in 2023. Federal and state governments took 17.3 percent in taxes from 2014 to 2023, but that dipped to 14.3 percent in 2023.
The price of oil remained the major factor, 52.3 percent between 2014 and 2023, and 52.6 percent in 2023.
“What really moves up or down gasoline prices is crude oil,” T. Mason Hamilton, a senior petroleum markets analyst with the U.S. EIA, explained to the blog “How Stuff Works.”
These percentages only tell a sliver of the story, that the main inputs of the gasoline industry shift often and sometimes in unpredictable ways. Additionally, every step of the process from finding the oil reserves in the first place to operating a gas station must include enough profit to provide an incentive to continue operation.
Like most situations, however, the higher levels can appear neat and clean-cut while things look much more complex as they get near “the ground.”
Dr. Carrie Whitney offered an explanation for some regional and local issues in the blog How Stuff Works. She stated that gas stations of a certain “brand,” such as Sheetz, “buys its own contracted brand of gasoline, which boasts a special recipe.” That enables the companies to make specific claims on the performance of their gasoline, but also makes prices for such chains higher.
Independent gasoline stations that are not contracted to purchase a certain type of gasoline have the freedom to price gasoline on the open market. That includes not only “mom and pop” operations, but also Walmart’s gasoline stations. The downside to this lies in the lack of a guaranteed supply in times of shortages.
This explains the peculiar dynamic in New Creek up in Mineral County where Walmart regularly sells for 20 or more cents per gallon less than Sheetz only a few miles away.
But that’s not all.
Another important factor lies in transportation costs. Different gasoline stations may employ different firms to truck the product. Major chains may operate their own fleet of trucks and distribution system.
“Routes from rig to pump,” explains Whitney, may vary, but each must factor in the transportation price. If Franklin gasoline prices consistently rank at a dime higher than Petersburg or Moorefield stations, that may reflect the added cost of the rig getting to Franklin and then on to its next stop.
The U.S. EIA notes that stations closer to an oil refinery tend to have better prices. For example, customers in the western part of the Mountain State with access to oil from Marathon’s Ashland, Kentucky, refinery should offer better prices.
Another important set of factors lies in the costs of the individual station and the value of its other revenue streams, as well as cost of local taxes, labor, rent, utilities, and other normal costs of doing any business.
Selena Maranjian in the Motley Fool shared a more controversial component of gasoline prices. Some companies use “zone pricing” to pad profit margins. Zone pricing identifies neighborhoods or other areas seen as “affluent,” for example, they may have very high home values. This boosts prices sold in those areas by sometimes as much as 30 or 40 cents per gallon.
Experts also note that the presence of competition can have a strong effect. The U.S. EIA explained that “prices at gasoline stations are often highest in locations with fewer gasoline stations. Even stations located close together may have different traffic patterns, rent, and sources of supply that influence pricing.”
