MINNEAPOLIS (WCCO) — Along Cliff Road in Burnsville, the price of gas at River Hills Automotive was $2.49/gallon on Monday afternoon.
Less than half a mile away, it was $2.58/gallon at the SuperAmerica and Kwik Trip.
According to AAA, the average gas price in Minnesota is $2.52/gallon, but it fluctuates between $2.25/gallon and $2.75/gallon.
So, Dorothy from Roseville and Roger from Red Wing asked: Why do gas prices vary so much from town to town? Good Question.
“Local completion can often determine when the price might be heading up or down,” says Dave Barnes, owner of River Hills Automotive in Burnsville. That’s often why two gas station situated across the street from each other will often display the same price.
Already on Monday, he had dropped his price twice from $2.56/gallon to $2.49/gallon. He said two major factors influenced that decision — he’d gotten a gas delivery that morning that was cheaper than previous days, and his competitors had dropped their prices.
Location can also play a role. Gas stations without competition that are closer to the highway often charge higher prices. Experts also say gas stations closer to people’s commutes can charge more.
“The prices are driven by differences in demand,” says Akshay Rao, a pricing expert at the Carlson School of Management at the University of Minnesota. “People have to get to work and don’t have time to shop around because they need gas.”
In Minnesota, gas stations must charge at least eight cents more than what they pay for wholesale. That’s to protect mom-and-pop shops from being undercut by companies trying to gain market share by selling below cost.
The National Association of Convenience Stores says some companies might also get volume discounts, which lower their wholesale costs. Others sell more expensive branded gasoline, which would mean higher wholesale costs.
Barnes points out different refineries might charge different wholesale prices, which would affect the retail prices.
“If that refinery has issues, costs are higher, that can change things,” he says.
He recommends to people who are concerned about lowering their gas prices that they join a rewards program.
“If you’re not part of a rewards program or using coupons, you’re just funding someone else’s gasoline,” he says.