Thursday, January 5, 2012

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As we all have noticed, gas prices have been rising significantly. However there are a lot of factors that go into the price of oil. There is a lot of manipulation by Wall Street that goes into the prices of gasoline, which can lead to the quick changes in prices. There is also competition in the market. If one station lowers their price, the station across the street will too so that they customers will still come to their station. The hardest thing about this for consumers is that they can't really avoid buying gas. If you need to fill up your tank there are no substitutes. Sure you can go to the station down the street that is a penny cheaper because of the competition in the market, but you can't fill up your tank with water or peanut butter.
I also thought it was interesting that there is so little profit for stations on gasoline. Instead they want to draw customers inside to purchase beverages and snacks. It never occurred to me that the lowest priced gas station could also make a profit this way. If you lose a penny per gallon on gasoline to draw customers in but then sell the customer two sodas and a bag of chips, you are going to make more money than you would have with a higher price of gasoline. It's also interesting that shop owners realize this and are willing to take the chance that people might just buy gasoline. However if they don't take that risk they may end up with much lower profits. If gas prices continue to rise I think it will be interesting to see if consumers continue to purchase goods inside the convenience store, or if they feel the need to cut back because of the high prices at the pump and to see if this also has an effect on gas prices.

1 comment:

  1. As a driver in today’s world it is obvious to see the changes in gas prices wherever I go. The prices are better at one station, and then the one across the street is a couple cents more expensive. I agree with Grace’s point that no matter how high the gas prices are, the demand for gas will never go down. To drive a car you have to purchase gas for your car; it is as simple as that. I also agree with the article from the point of view that gas stations could lower their gas prices in an effort to make more money on the items inside their store. Seldom do people look at the deals in the window of the gas station, most likely because whatever it is they’re advertising isn’t appealing. But if we were to look at the reasoning behind all the advertisements and lower gas prices, it makes sense. The lower the gas prices and the more you sell inside the store, the more profits your making. The gas station that effectively sells more inside the store with lower gas prices is actually the more successful one. They are making up for the lower prices by selling more drink, food, etc. I fully agree with the article and I am also interested in seeing if the advertisements for inside the gas stations store pay off.