The shock of lower gas prices has probably worn off by now, but have you noticed the small, unbranded gas stations are often the first to lower their prices? Many of them stay competitive even when the name-brands cut their prices.
KUT News is helping explain why stations offer different prices for essentially the same product by taking us on a trip from the pump back to the pipeline to see how gas is bought, sold and transported.
Gas stations get gas from a fuel distributor, known in the business as a “jobber.”
The jobber:
· has contracts with different oil companies
· controls fleets of tanker trucks
· buys fuel branded and unbranded at a central distribution hub called a “rack.”
Racks have as many as ten different suppliers. If the jobber isn’t under contract, they can almost choose from almost any supplier on a given day. It’s like a gas station for gas stations.
Racks are also where additives are added like ethanol, or special ingredients for name brands.
Fuel is transported to the racks through pipelines.
The bottom line of why small stores are the first to lower prices is that they are not under contract with big oil companies. They reduce prices at the pump to get customers into the store where the profit margin is bigger. Large chain stores have lower prices because they can negotiate better prices due to the volume they sell.