How is it that the cost of gas fluctuates so much. Now I see the station buying gas by the hundres of gallons.

Question

Isn't it shady to vary your price and say its according to the middle east when you bought it at a set price?

Answer 1

It's not shady at all.  Gasoline is a commodity.  That means it's basically the same no matter where you get it, especially prior to delivery to your local station.  When your local station owner gets a delivery, he pays the rack price he qualifies for, based on volume.  That price can change daily, based on spot market pricing.  This means the value of what's in his tanks fluctuates with market prices.

Think of it this way:  You have a gold ingot.  You bought it five years ago, when gold was $350 an ounce.  Now, gold is selling for $950 an ounce.  Someone convinces you to sell them an ounce of your gold ingot.  What price are you going to sell it at?  $950, of course.  That's the value of an ounce of gold, everywhere in the world.

Now change the scenario.  You bought the gold ingot today and in two years, gold is selling for $400 an ounce.  Someone comes to you and offers to buy that ounce of gold again.  You want to sell it for $950, in order to not realize a loss, but the buyer is only willing to pay $400.  You can't sell for $950, because the value is only $400 and since gold is a commodity, it's the same anywhere and someone else will be willing to sell for $400, if you're not.

The same principles apply to gasoline.  As a consumer, you can go to any station and get a servicable gallon of gasoline.  If one station tries to charge too much, it will lose some business to a lower priced station nearby.  Of course, there's brand loyalty and convenience to factor in, but even as an oil company employee, I price shop.  If another Top Tier brand is selling for a nickel less per gallon than my brand, I'll buy the other brand.  My loyalty is worth a nickel per gallon in close proximity.  Get more than a mile from my brand and the price becomes immaterial, as a nickel per gallon savings for 20 gallons only saves me a dollar.

I won't buy a non-Top Tier gasoline unless I'm in danger of running out, because the savings is more than offset by the wear and tear on my car's engine.  There'd have to be a savings of over 20 cents/gallon for me to even consider a discount gasoline purchase, and that's not going to happen very often.  My 20 cent threshold is to offset the price of a fuel additive I'd have to purchase off the shelf to regain the detergency I'm losing buying the lower quality brand.

Answer 2

they just keep raising the price  ,, it just looks that way