Gasoline prices

[8gv]

Originally Posted by noreast

Also, I'm sure they don't go thru it that fast so there price is based on what they paid.

I see this as a factor when the prices are dropping. Maybe someone in the business can chime in to correct me. How I think it works:

A station pays a back door price at time of delivery.

When a competing station gets a delivery with a lower back door price their retail price is lower.

The consumer chooses the lower price station thus expediting the liquidation of its inventory.

The higher priced station sells its inventory more slowly.

When the lower priced station gets another, cheaper, delivery the price difference is made even greater.

Now the higher priced station is really stuck and may have to capitulate to selling at a loss to keep the cash coming in and more importantly, get access to cheaper product coming into the back door.

[BroadHopper]

This is true. Lakeport Landing sells tons of gas so they are the price leader because of turn over. Thurston does not sell as much gas, turn over is low so their price is higher. However the opposite can happen Lakeport Landing may need to raise price when inventory cost more. Thurston price remains the same and eventually LL price may exceed Thurston's when inventory price is high. It's a crazy circle!

Originally Posted by 8gv

I see this as a factor when the prices are dropping. Maybe someone in the business can chime in to correct me. How I think it works:

A station pays a back door price at time of delivery.

When a competing station gets a delivery with a lower back door price their retail price is lower.

The consumer chooses the lower price station thus expediting the liquidation of its inventory.

The higher priced station sells its inventory more slowly.

When the lower priced station gets another, cheaper, delivery the price difference is made even greater.

Now the higher priced station is really stuck and may have to capitulate to selling at a loss to keep the cash coming in and more importantly, get access to cheaper product coming into the back door.

[TheProfessor]

Price of petrol.

From what I read, it is the Saudi government that is flooding the world market.
The intent is to shut down the tar sands or whatever the correct name is.
Opinions vary. The tar sands oil from Canada and the US require somewhere above $60.00 to break even. Experts of course vary on this price.
All is a gamble by the Saudi government.
Yes, todays price is an advantage to the average Joe/Jane purchasing gasoline.
But this could all end quickly if the Saudi government cuts back.

But back to the Lakes Region. The lowering of gasoline prices is a good thing for this seasonal industry. Although locals may not appreciate the increased traffic, money does come into the area from those out of state coming here.

[CoolandtheGang]

Originally Posted by 8gv

I see this as a factor when the prices are dropping. Maybe someone in the business can chime in to correct me. How I think it works:

A station pays a back door price at time of delivery.

When a competing station gets a delivery with a lower back door price their retail price is lower.

The consumer chooses the lower price station thus expediting the liquidation of its inventory.

The higher priced station sells its inventory more slowly.

When the lower priced station gets another, cheaper, delivery the price difference is made even greater.

Now the higher priced station is really stuck and may have to capitulate to selling at a loss to keep the cash coming in and more importantly, get access to cheaper product coming into the back door.

A very simplistic answer:

For your average service station they really don't care the price they paid for what they currently have in their tanks (last delivery), they are pricing to cover their next delivery; i.e. replacement cost. Essentially the initial investment in their service station included full storage tanks of gasoline. They then sell that gasoline to raise the funds to purchase more gasoline and in the process they hopefully make a couple of cents net profit. That is how they can make money when prices go up OR down. By and large, service stations prefer declining/lower prices.