October 21, 2014

Medina
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Why do gas prices differ day to day, place to place?

On Thursday, regular unleaded fuel sold for $3.48 a gallon at the Sunoco station, 6392 Lafayette Road, Lafayette Township. Five miles north, regular unleaded gas was $3.55 a gallon at Stop ’n Go, 828 W. Liberty St., Medina. (GAZETTE PHOTO BY LOREN GENSON)

Bill Preisler has been a gas price watcher for two years. That’s when he began asking why service stations in the same area often have much different prices.

“I bought a car that gets crappy gas mileage that became a price issue,” Preisler said. “I started off looking for the cheapest gas.”

Every day for the past 250 days, Preisler has recorded the prices at the two gas stations closest to his home in Beachwood, on Cleveland’s east side. He shares his data with the nonprofit website GasBuddy.com.

GasBuddy aims to offer consumers of gasoline the opportunity to find the best deals when it comes to filling up their tanks — even if it means traveling some miles.

Preisler said the savings can be substantial.

“There have been times when the prices in Macedonia have been 40 cents less and I have driven the 10 to 12 miles,” he said.

While a 40-cent difference is unusual, there’s no question that gas prices vary — even among service stations in the same community.

To find out how big a difference there is, The Gazette compiled data from GasBuddy for 148 service stations in three communities in Medina County and seven communities in a half-dozen neighboring counties. The prices were from 15 days — May 30 to June 27.

The survey, while making no claims to being scientific, showed some surprising results.

On any given day, the difference between the highest and lowest prices ranged widely, from 8 cents to 28 cents, and averaged 18 cents.

But the overall average difference during the nearly monthlong survey was substantially less — only 12 cents — indicating the differences were smoothed out a bit over time.

The survey also found a possible correlation between the difference in prices at the pump of the individual service stations and the wholesale price of gas.

The roller coaster ride of retail gas prices is almost entirely the work of wholesalers, who set the prices as reactions to the world market of gasoline, experts say.

The two factors most often cited for the sometimes wild price swings in gas are the international situation in the Mideast and other oil-rich regions and the production capabilities of refineries.

During the time of the survey, prices fell dramatically as the main refineries — BP’s Whiting, Ind., plant and ExxonMobile’s Joliet, Ill., plant — that supply Northeast Ohio its gasoline increased production after springtime maintenance.

When those refineries reduced production in late May, Northeast Ohioans saw gas prices spike to an average of $3.97 on June 6 — the highest in the country.

While prices remained high, the difference between highest and lowest prices at the individual stations surveyed dropped to 8 cents and remained below 15 cents for about a week.

Patrick Dehaan, senior petroleum analyst for GasBuddy, said that makes economic sense because higher wholesale prices mean smaller profit margins and less room for individual station owners to maneuver.

When wholesale prices decline, the owners have more freedom to set prices to more aggressively compete for customers.

“Stations can pass along increases at the same time,” Dehaan said. “But when it decreases, then they can make up for lost profit when the gas was high.”

The results of the survey supported that analysis: The lowest average price of gas — $3.31 — and the biggest price gap between communities — 28 cents — occurred on the same day, June 25.

Overall, the survey found the cheapest gas on the southside of Cleveland, where the price dipped as low as $3.13.

Medina and Wooster saw the highest prices, peaking at $3.99.

Medina is only about 25 miles from Cleveland’s southern border. Why so big a difference in gas prices?

James Patneau Jr., president of Medina-based wholesaler Free Enterprises Inc. and owner of four local gas stations, said there is no simple answer to that question.

Patneau said one reason stations might drop the price at the pump is to attract customers to buy food and other goods.

“It’s not that there is no rhyme or reason,” Patneau said. “People use the fuel pricing and sales for a lot of different reasons. In the normal course of business, normal influences can explain why certain things happen, but there is always the wild card.”

Preisler said the two stations he monitors are competitors and respond to each other’s price changes.

“What I’ve noticed is that the Shell drops first, and then the BP follows sometime in the next 24 hours,” he said. “Then, BP goes up first and the Shell follows.

Contact reporter Andrew Davis at (330) 721-4050 or adavis@medina-gazette.com.