Gas Prices

[Roonie]

What I don't understand is this. How can gas prices flucuate so much in one week? I give you an example as to why I don't understand it........

Lets say a gas station buys its tanker of gas once a week or even bi-weekly or possibly monthly? That tanker comes in and fills up the underground tank at the gas station. That station bought that gas at whatever price it was at the beginning of the week lets say 10 cents a gallon.

By the end of the week it could have gone up to $1.00 that the consumer is paying even though the gas the consumer is using is still from the beginning of the week bought at 10 cents at the lower price. I have seen gas prices go up and down during the week so I guess I don't understand how there could be such big swings in pricing? I assume it is a gradula increase they employ so there is no sticker shock the next time the tanker fills the tanks at the station so they don't do a sudden jump from 10 cents to $1.00 in price overnight? Either way that is a lot of profit.

[WickedLou9]

Originally Posted by Roonie

What I don't understand is this. How can gas prices flucuate so much in one week? I give you an example as to why I don't understand it........

Lets say a gas station buys its tanker of gas once a week or even bi-weekly or possibly monthly? That tanker comes in and fills up the underground tank at the gas station. That station bought that gas at whatever price it was at the beginning of the week lets say 10 cents a gallon.

By the end of the week it could have gone up to $1.00 that the consumer is paying even though the gas the consumer is using is still from the beginning of the week bought at 10 cents at the lower price. I have seen gas prices go up and down during the week so I guess I don't understand how there could be such big swings in pricing? I assume it is a gradula increase they employ so there is no sticker shock the next time the tanker fills the tanks at the station so they don't do a sudden jump from 10 cents to $1.00 in price overnight? Either way that is a lot of profit.

They have to guess. They guess at how much their next tank will cost and charge accordingly. So if they think that thier next delivery is going to be more expensive, they charge more at the pump ahead of time.

[JaJae]

Originally Posted by Roonie

What I don't understand is this. How can gas prices flucuate so much in one week? I give you an example as to why I don't understand it........

Cash flow. The value of their product is ever changing.

Consider this. They get their gas delivery on Sundays. Every week they receive and disperse 1,000 gallons of gas.

On Sunday when they get their gas cost is $900 so they set their price at $1 a gallon for the week. They make bring in $1000 for a profit of $100. Sunday comes rolling around and suddenly their gas cost is $1200. But they only made $1000 last week? Ut oh.

It's all about cash flow. Obviously these numbers aren't consistent, but you get the idea. They go up and down because of the market value of their product. They're always trying to give you the cheapest price they can to stay competitive.

If that next Sunday the fuel cost is now $750 instead of the $900, they would pick up $150. But Joe Schmoe down the road reset his prices all week to keep up with the market prices and so his rates were cheaper. He got all the business and you lost out because you didn't sell your normal amount of gas.

The same goes if they raise prices keep up with costs/competition. They have to make their money. Because of the extreme competition gas prices are fixed to the market value. In the end it averages out.