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Gasoline Pricing & Fuel Economy

Frequently Asked Questions

Gasoline Prices: 


Why has the price of gasoline gone up so much in the past few years?


Retail prices have increased because the commodity prices that retailers pay for refined gasoline have increased significantly. The two main factors contributing to this increase are: Higher crude prices, which reached record levels exceeding $85 US per barrel in 2011. Crude oil prices are set in the international marketplace and reflect global supply and demand conditions. They are influenced by factors such as inventory levels and geopolitical events including wars, weather, strikes and general economic conditions.Wholesale prices for gasoline are also influenced by their own set of international supply and demand pressures. Because gasoline can be easily imported and exported, prices are greatly influenced by supply and demand factors in Europe and the U.S. as well as Canada.

 

Why do retail gasoline prices vary so much between markets, and even within the same city?


While retail prices follow changes in crude and wholesale commodity prices, both up and down, they are also heavily influenced by local conditions. Factors such as market size, the level of competition, taxes and retailing and distribution efficiencies can lead to situations where prices vary considerably between communities or change dramatically within a short period of time.


Why do retail prices seem to move up and down together? Isn't this collusion?


Consumers are very price sensitive when it comes to buying gasoline. Because of this, a retailer may lower their price to gain a temporary price advantage to attract more customers. If other retailers allow their price to remain higher for a significant period of time they will lose sales. For this reason retailers frequently observe the price signs of their competitors in the area to keep their prices competitive. As prices in the market decline to a point where a retailer feels profitability is unacceptable, that retailer may increase their price back to a profitable level. Other retailers may or may not choose to follow. If they do follow, the market is restored to a higher price level and the cycle then repeats itself. This continuous cycle is often misinterpreted as collusion, when it is in fact due to vigorous, healthy competition.

 

Who sets the price of gasoline at a station?


This varies depending on the mode of operation. Prices for the independently owned and operated sites are set by the operator. Although a retailer may be able to choose the price at their retail site(s), the need to remain competitive with the surrounding market means that ultimately the local market dictates the maximum price.

 

Why are newer gas stations bigger, with more pumps and large convenience stores?


The retail gasoline landscape has evolved toward fewer, larger, higher throughput facilities with a growing reliance on ancillary sales (convenience stores, car washes, fast food, etc.), capable of competing with the most efficient gasoline retailers. There may be no better example of how competition in a free market drives improvement toward lower costs, and ultimately lower prices for consumers, as it is intended to do.

 

Aren't oil companies making record profits with the higher pump prices we have seen?


Oil companies with upstream operations that explore for and produce crude oil and natural gas have seen increased profits from the higher world prices for these commodities. However, retail gasoline margins on a per gallon basis have decreased over the past few years as larger, higher throughput sites with significant ancillary revenue sources (convenience stores, car washes, fast food, etc.) enter the market.

 

Why do prices tend to go up just before a long weekend?


Prices for gasoline do tend to increase in the summer months when consumers travel more and the demand for gasoline increases. Consumers may pay closer attention to gasoline prices when they fill up before or during a long weekend trip, however industry data shows no such pre-long weekend price increase trend.

 

Fuel Economy:


How can I improve my fuel economy?


Vehicle type, driving style, good vehicle maintenance and driving conditions have the greatest effect on fuel economy. Driving for best fuel economy involves:

Smooth, steady acceleration rather than "jackrabbit" starts
Maintaining moderate speeds
Avoiding heavy loads
Avoiding a luggage rack or towing a trailer unnecessarily
Avoiding using an air conditioner or heater unnecessarily
Not idling the engine when it could be switched off (generally not longer than 10 seconds), and
Avoiding short trips where the engine does not have the opportunity to fully warm up.

 

Maintenance factors include:


A properly tuned engine
Clean air filters
Aligned and balanced wheels
Tires with the correct air pressure
Periodic changing of the fuel line filter (in older vehicles)

 

Driving conditions that can reduce fuel economy include:


Cold temperatures
Head winds
Driving up hills
Water
Slush
Snow on the road

 

Will higher octane improve a vehicle's fuel economy?


Generally, higher octane will not improve fuel economy. In fact, the difference in composition or heating value of different grades of gasoline plays a small role in fuel economy. Good fuel economy is a result of vehicle design and weight, good vehicle maintenance and driving style.

 

How can I save on fuel?


Various factors can affect the fuel economy in your car: driving style, car maintenance and vehicle type. Improve your economy by 10% and get the most out of driving.

 

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