What Is the Logic Behind this Pricing Strategy?

Another possible reason that this is okay is that a lot of people have gas cards and only buy that kind of gas. My mom has few brand loyalties other than Chevron gas, because she has a Chevron card. I've literally never seen her buy gas at any other station. Similarly, I've never seen my dad buy anywhere but Shell. When I was a little kid I thought Chevron was for girls and Shell was for boys and wondered what all the other things that looked like gas stations actually were.

Each time a gas station gets a refill from the tanker truck they may pay a different price. The station then adjusts the price accordingly. If one station happens to need a fillup first when the price is changing then there will be a price differential.

I don't know if this is the case everywhere, but in Portland, the gas stations that are 10 cents cheaper are usually places where you have to go inside to pay, regardless of your form of payment. That's a total dealbreaker for a lot of people, especially those of us who are unwilling to a) leave an infant in the car or b) unstrap that infant, take him inside, wait in line for assholes to pay for their pounders of Schlitz with a credit card, continue waiting for the tank to fill in order to get the total, pay, and strap the kid back into the carseat. 10 cents a gallon extra to avoid the hassle is totally worth it.

There were two stations duking it out in Seattle that always cracked me up. One offered a 5 cent per gallon discount for cash. So their sign said "WE DISCOUNT FOR CASH." And the other guy turned it around, and his sign said "WE DO NOT CHARGE EXTRA FOR CREDIT."

I previewed when I meant to post. My point is that a strategy of charging the sunk cost, rather than the replacement cost, is easily dominated.

JJ86's comment, supported by klangklangston, rcavett, and dhartung, makes absolutely no sense to me. If the price of oil (and the price of wholesale gasoline) doubled overnight, there's no effing way that station owners would charge their in-tank cost, rather than replacement cost.

My SO is a fuel broker. JJ86's explanation is the truth. A price per gallon is set by the refinery. Transportation charges are then added based on the distance the fuel must be transported from the refinery. So, while he may be able to get fuel at a cheaper price from a certain refinery, he may order it from a refinery closer by to avoid having to add as much freight charge. If a gas station owner buys a tanker full (8500 gallons) of fuel at say, $2.50 a gallon, he is taking a chance that it may go up or down the next day. His $2.50 a gallon gas may only be worth $2.25 or it may be worth $2.75 the next day. Sometimes they guess wrong and have to either eat the difference or try to last it out and sell it if they can at their cost. By-the-way, I promise there aren't any brokers or gas station owners getting rich in this thing. In fact, many, many gas station owners sell gas at their cost just to get you to come in a buy a coke or snacks. The broker makes a set margin per gallon so we actually eat better around here when the price is lower and people are driving their gas guzzlers than when the price is higher and everyone is riding their bikes to work. p.s. I'd go get gas tonight if you can...it's going up tomorrow.

The town where I grew up has two gas stations, right on Main Street, both next to each other. One charges $0.10 more a gallon than the other -- because that guy will fill it for you, and at the cheaper one (like everywhere else in the state) you have to pump your own. Everyone in town knows that (along with the owners' kids' grades, practically), but if you were just driving through, you'd see the two different prices and wonder why.

"Each time a gas station gets a refill from the tanker truck they may pay a different price. The station then adjusts the price accordingly. If one station happens to need a fillup first when the price is changing then there will be a price differential. That's exceedingly difficult to believe." It's true for a lot of stations, at least here in Michigan. While I realize that this sounds like a hairdresser story, my girlfriend's former coworker used to run a gas station as a second job, and that's what happened all the time. It also supported the "there's no difference in gas" theory.