The choices of gas stations that I have to choose from in my local area are QT, Shell, and Chevron. I personally liked Chevron for the techron that cleans your engine. But my husband started using QT gas when we moved into this neighbor because there are no Chevron’s close around. This QT is right down the street from my house and because we have to pass it to go to work, it is a good location for us. This gas station is a very busy place from Monday thru Sunday. Sometimes it’s so busy they run out of gas before the next scheduled visit. And sometimes it’s hard to get a pump.
The price differences between them are not much-QuikTrip right now is running about $3.18 a gallon (for the regular), Shell is running about $3.26, and Chevron $3.24. But we like using the same one over and over and not switching (because of price changes) from one to the other. If you are going to pay for a better quality of product, then you will be paying more for it.
Chevron and Shell are just two of the top names in the gasoline industry and they are more expensive than QuikTrip. The factors the account for differences is again price but also quality. Right now people are going where they can get more for their money, but some are staying with what they think is a better quality and they don’t mind paying for it.
The type of market structure that I think applies to the local gasoline market (QuikTrip) near my house is an Oligopoly: (This word came from the Greek and it means-few sellers) Which involves only a few sellers of a standardized or differentiated product, so each firm is affected by the decisions of its rivals and must take those decisions into account in determining its own price and output (McConnell, 2010). Because the decision of each seller is taken into account, when one gas station go up they all go up.
CRUDE OIL – SPOT WEST TEXAS INTERMEDIATE CRUDE OIL
REFINERY – REFINERY SPOT GASOLINE PRICE
PIPELINE – PIPELINE SPOT GASOLINE PRICE
CITY TERMINAL – RACK PRICE
RETAIL STATION – RETAIL GASOLINE PRICE
Spot crude oil prices affect the supply and demand of crude oil. Refinery spot gasoline prices impacts crude oil and prices. Gasoline moves through the system and may trade at spot prices at major pipeline delivery points. Then, the terminal “rack” price is a wholesale price and which represents a percentage of refiners’, gasoline sales and this is all part of a price asymmetry. Asymmetry: Prices rising and falling at different rates at different levels in the pricing structure. Passthrough: the lags between price changes in upstream prices and the corresponding changes in downstream prices. (www.doe.gov)
McConnell, C. Brue, S. & Flynn, S. (2010). Micrieconomics, Brief Edition. Boston, MA: Mcgraw-Hill Irwin.