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Bill Snider, tank wagon driver for Lanman Oil Company of Charleston, fills the fuel tanks at a local service station Thursday afternoon.

Uncertainty in raising gas prices

By: Carly Mullady/ Staff writer

Posted: 2/24/03

In addition to corporate supply and demand combined with local competition, times of uncertainty and regional factors all determine the price of gasoline.

Gas prices reflect the wholesale price set by stock market competitive prices combined with local market sales. The fuel cost and stock market control the supplier for wholesale cost and then the local market has a small effect on overall prices.

Wholesale prices typically rise during times of uncertainty. This sets the base price for gas suppliers everywhere, Jim Dunn, owner of the Charleston British Petroleum, station said.

"As we continue nearing the war issue, I say we'll see a spike in prices of everything from gas to groceries," Dunn said. He also said as certainty among the public increases, the prices will begin to decrease.

Dunn compared the recent price spike to the response of the Sept. 11 tragedy.

"Everyone was uncertain, so prices went up, but prices settled with certainty," he said.

Regional factors also may adjust prices. Dunn said a fire destroyed an Amoco Refinery in the Chicago area recently, which caused prices to rise by a few cents per gallon.

Mike Sportzum, manager of the Mattoon Citgo, said the only way prices would vary greatly regionally or by state would be state sales tax.

He said Indiana used to have considerably lower gas prices until sales tax increased there.

"Now, prices are about the same," Sportzum said.

Local competition has a small effect on the cost of gas. Today's wholesale cost leaves a 4-cent to 8-cent competitive margin locally.

"The wholesale price is $1.59 per gallon and we are charging $1.66 right now, so we have a 7-cent margin," Dunn said.

The few cents added to each gallon varies competitively depending on how much over wholesale price each store is charging. They all work to match each other and appeal to customers.

"What we do is, everyday, we actually drive around and survey everyone else," Sportzum said.

Sportzum then uses other stores' prices to set the cost above wholesale.

"Our station will typically try to match the lowest gas price in the county, if not lower," Sportzum said. Individual stations are not notified long in advance when prices will increase.

"We don't know a week ahead or even a day ahead usually," Sportzum said. "It is usually pretty last minute." When prices are up, customers still continue purchasing gas. Sportzum said even when there was a drastic increase, sales did not take an incredible fall.

"People watch a little closer to how much they use," he said.

People rely on gas to get them to work or school, Dunn said. So although consumers carefully avoid waste, people still always need gas.