What Determines Gas Prices

Gas prices always seem too high and most people find themselves driving around town to find the cheapest price. Everyone loves to save at the pump. There are a few different smartphone apps that help and show you which gas stations have the lowest price. Gas prices jump or drop every day but who sets that price? Have you ever thought to yourself “what determines the price of gas?” 

We as consumers like to blame the big oil companies, refineries, or the distributors for the high gas prices. While they absolutely do contribute to the overall price, there are many factors that determine gas stations price. 

Location is a factor. If a gas station doesn’t have competition and is closer to the highway or an area where many commutes, they often charge a higher price. If there is a competitor that can drive the price up or down, most likely down. The competition gas stations want the lowest price to draw in the most customers. Owners will go out at least twice a day to check out the competition and see if their prices have changed. This is why you often see gas stations across the street from each other with the same price, give or take a few pennies. 

Another factor is who owns the gas station. If the gas station is owned by a corporation then that corporation will set the price. The corporation looks at competitors in the area and also factors in property taxes. State, county, and city taxes also affect the final cost of a gallon of gas.

The last factor in the gas price is the wholesale cost for a gallon of gas. In Minnesota, a gas station must charge a minimum of 8 cents more than what they pay from the wholesaler. This law is to protect small businesses from being undercut by big companies that are trying to gain market share by selling below cost. Typically, gas stations add on about 11-12 cents per gallon. Overall, the biggest factor is competition. Both business and consumers react to what the competitor is doing and it's a constant back and forth battle. 

Gas prices can be drastically different from town to town, even if it’s only a 10 minute drive away. To save you time and money at the pump check out GasBuddy. GasBuddy will show you the best gas prices in your area or on your commute. It’s updated as often as every hour to ensure the best price. Another way to save at the pump is to join a fuel rewards program of some sort so that you can get coupons and discounts at the pump. 

If you ever want help making your vehicle as fuel efficient as possible, reach out to the team at AutoPro Auto Service in Minnesota. We’d love to be your go-to for all things auto repair and auto efficiency. Make your appointment today! You can find us at 7901 W River Rd, Brooklyn Park, MN 55444 Monday through Friday from 8:00 am to 6:00 pm. 


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