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tmarx tmarx
 
M$2 January 21, 2009 02:06 AM

Why do gas prices change on a daily basis?

Most gas stations only get gas delivered every few days, so why do the prices change daily?  Logically it would seem the price would be fixed on what the gas station actually paid for the gas when it was delivered
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successful... successful...
 
 January 21, 2009 08:54 AM
They change because they have to stay competitive with other gas stations.  if gas station A receives gas on monday for $2 and gas station B on tuesday for $1.90, gas station A must compete with gas station B and lower its price.  If it doesn't, everyone will buy from B, and A will be stuck with its "more expensive" gas until the price goes above $2, and it can sell it all.  The way it is now, some days a gas station will make more, and some days it will make less, but overall it will move a large amount of gas with a steady profit, and will not be affected by what day it bought the gas on.  
The reason gas prices are so volatile in the states is that gas is completely unregulated there.  In other countries (i lived in Mexico for a while)  gas is much more stable because when the price increases quickly, the govt. subsidizes it, and when it decreases, the govt. recoups its losses from subsidizing it.  This way gas stations all pay the same amount for the gas no matter what the market rate is, and don't have to match another stations price
Asker's Rating:
• Thank you for actually answering the question I asked and not talking about the oil markets.


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alfy alfy
 
January 21, 2009 02:16 AM
I am not an expert in this field but i would guess that they need to make sure they don't make a loss on the current market cost to themself, to do so they keep ajdusting the pump prices to follow the oil cost change

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robbrown robbrown
 
January 21, 2009 02:21 AM
The short answer: To make as much money as possible.

The long answer:
Gasoline and crude oil are both commodities. Commodities are usually bought and sold at prices that change daily. Something a little closer to home with a similar structure is the value of our dollar.

The wholesale price for gas changes daily and as a result, so do the prices at the pump. At least that's what economics will tell you.

Specifically, some of the variables that impact the wholesale price of gas on a daily basis include:
The cost to produce and deliver fuel to customers
Costs of crude oil
refinery processing
marketing and distribution
retail station operation
profits (and sometimes losses) of the refiners, marketers, distributors, and retail station owners.
and taxes.

A better scenario than the daily commodity market pricing might be for each gas station to purchase the gas that they need and then charge their customers a markup on that product.  However, gas stations don't really own the gas until it's sold and as a result, even independently owned gas stations can't change the price.
Source(s):
http://en.wikipedia.org/wiki/Commodity

http://www.eia.doe.gov/bookshelf/brochures/diesel/


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chazzyfen chazzyfen
 
January 21, 2009 02:21 AM
Gas prices fluctuate for any number of reasons, but here are a few:  
1. Increase/decrease in demand for gas - The more people want gas the more it will cost and vice-versa.  
2. Increase/decrease in production of gas - The more gas there is out there, the less it costs to get some and when there is less it costs more (when a tanker spills there might be a slight spike in prices).  
3. Time of year/season - Gas prices will change accordingly by the season that they are in.  
4. Competition between local gas stations - When stations compete they change their prices to try and outwit their competitors (One station may try to lower its prices to get more customers and set off a chain reaction).
Source(s):
http://www.eia.doe.gov/bookshelf/brochures/gasolinepricesprimer/


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marcel m marcel m
 
January 21, 2009 02:43 AM
The argument that their prices should remain fixed pegged to the buying price of their stocks is the ideal in economics. I guess its what they call the dynamics of a Perfect Market, however the reality is somewhat different. The reality is that the Gas Market is highly speculative, due to the fact that the major producers of the commodity are in conflict zone or regions of instability i.e the Middle East. 
Secondly the oil exporting cartel OPEC,but if you check out their website they have their own view largely fixes the gas prices mainly by controlling the number of barrels available in the open market. Thus not permitting the market to correct itself ideally the way it  should if it were to strictly follow the rules of supply and demand..So that is the reason why you see them employ that convoluted logic of day to day gas price hikes inspite of the Buying Price of available stocks in their Depot. I hope this shades a light(literally) on the intrigues involved in fixing gas prices.
Source(s):
logical thought
http://www.opec.org/home/ http://www.opec.org/home/PowerPoint/Taxation/taxation.htm http://www.investopedia.com/university/economics/economics3.asp


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dhawk dhawk
 
January 21, 2009 05:30 AM
The key reasons gas prices change on a daily basis is because expectations about future oil prices have changed. Oil is traded on a very large global market (like stocks). You have some people buying and some people selling. Because buyers can easily find sellers and sellers can easily find buyers, the market is said to be "liquid." Many of these people buying and selling oil and contract for oil are investors/speculators. Speculators make up as much as 98% of the liquidity are oil markets. These people are trying to make money based on the movement of the price of oil.

Again, the key driver of prices is that something about the expectation of the future price of oil has changed. For example, if the market thought that OPEC would cut oil production by 5% in March 2009, but all of a sudden tomorrow OPEC says they will increase production by 10% next week, the market will react and price this new information in. Again, in this example something about the expectation of future prices changed which drives the shift in the price of oil.

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