Global Marketing

Why Gas Prices Fluctuate from City to City?

Have you ever wondered why gas prices vary from city to city, day to day? Gas prices are reliant on the price of oil and there are diverse factors that make the prices vary from one city to another such that a buyer in a specific city buys the gas at completely different prices at the same day and time in another city. Such factors include wholesale cost, transport costs, taxes and price on the street.

First are the supply and demand. An oversupply happens when the quantity of oil is higher than the people purchasing it. As the quantity supplied is high, the prices of all the petroleum products including gas fall, reducing the prices. The next factor is the value of the dollar. The global benchmark prices for all the petroleum products such as LPG, diesel, and petrol among others are priced in US dollars, therefore, the strength of the local currency in is likely to influence the price in the different cities across the world.

Petrol price cycles are the next factor that causes variation in gas across the cities. The sequence of pricing in diverse cities across the world sees prices fall gradually followed by a sharp rise. This occurs due to deliberate pricing policies and regulation of petrol retailers and is not directly linked to alterations in costs. The petroleum regulating agencies monitor these cycles and recommend the cheapest and most pricey days to purchase fuel in the cities. The next factor is the competition of the local market. Lower prices of gas and other petroleum products are generally observed in cities with many independent retailers since the competition between retailers is high. For this reason, cities with fewer retailers the gas prices is higher with some cents as compared to cities with many autonomous retailers. Last but not least is the regional factors.