How do gas station owners decide what price to set the fuel at?

Question

How do gas station owners decide what price to set the fuel at?

Answer 1

Same way the retail markup is established for anything else - wholesale price paid + x.x%, adjusted as necessary to compete with neighboring businesses.

In general, the profit margin the station owner sees on the gasoline sales is barely worth the trouble of selling the gas - a few percent at most.  They're getting hit with the same high prices we are and can't do anything about it - they really are making just a couple of cents per gallon in profit after all the bills are paid.  The convenience store/gas stations mostly are making their profits by bringing the customers into the store and selling them drinks, candy bars, etc.  Having that extra revenue stream is why they can afford to cut the gas prices they charge right down to the bone, just enough to cover the cost of the gas and running the pumps and lights.

What if you're one of those folks whose gas station is just that, a gas station?  Well, look at the prices.  They're probably higher than a similar station that also sells drinks.  Case in point, there's a Git 'n' Go on my way home that is selling fuel at $3.58/gal, right next door to it is an Amoco with no convenience sales, they charge $3.64.

Answer 2

I guess it is the same as grocery stores and other places that sell food and other items. How do they decide to sell a box of crackers for two dollars? Who decides the market value of anything?

Answer 3

my answer is;

As a former mgr. of a Gas Station I can answer that.

a) First you have the price per gallon charged to the station by the Wholesaler for the fuel.

b) Add in costs of operation and payroll and a penny or 2 of profit.

divide b by guesstimated number of gallons you'll sell.

c) add that number to the Wholesale price and you get what we pay at the pump.

hope my answer helps

PS I have seen the opposite of the above mentioned. Convenience store stations charge more in Oregon then Real gas stations that still do car service or are gas only operations. And we don't have self serve yet we are cheaper then Washington State, California, or Idaho!