Why Do Gas Prices Fluctuate So Much? WYSO Curious Investigates

Aug 31, 2017

Experts are warning we could see major spikes in the price of gasoline after Tropical Storm Harvey disrupted Texas Gulf Coast production. But gas prices tend to fluctuate even during times of relative calm -- WYSO Listener Chris Longo was wondering why that is? 

WYSO Curious intern Liam Niemeyer investigates.

Finding the best gas prices can be crapshoot for most people -- prices can fluctuate from hour to hour. Jeff Lenard, spokesman for the National Association of Convenience Stores, knows how a sudden spike in gas prices can get people angry.

“There’s an emotional connection to gas that doesn’t exist for other products. You see the prices driving by at 45 miles per hour. It connects with you a little bit more directly than a gallon of milk, a loaf of bread, things like that.”

But ultimately, Lenard says gas station owners don’t really have much control over the price, “Gas prices fluctuate because they’re tied to commodities. They’re tied to oil prices. And just like commodities, oil prices go up and down by the minute. So right now we’re looking at summer gas prices that are about at 12 year lows.”

Gas prices are so low this summer because the price of crude oil is also low. Crude oil is processed at refineries to make gasoline. And it’s cheap because there’s a lot of it out in the world right now. Tom Kloza with the Oil Price Information Service says we can thank U.S. fracking for that.

“Oil Shale is a big game-changer. And as recently as the Arab Spring back in 2011, there was very little oil coming from US shale. And that’s changed dramatically and will continue to change dramatically."

While there’s a glut of crude oil right now, Kloza says gas prices could still spike. Because gasoline is perishable, one natural disaster could wreck havoc on gas prices.

“But when you have problems with hurricane impacts, and refineries going down, fires, events, then justin time and become just-intolerable with very brief gasoline price spikes.”

In downtown Yellow Springs, a price bump can make or break the bank for Nipper’s Corner, a locally-owned independent gas station.

“We’ve been through good times and bad times. A lot more bad times. [laughs]," says Ben Vannusdal, who runs Nipper’s corner with his in-laws, Jane and Dennis Nipper. Whenever he needs gas, he calls Hartley Oil Company in Washington Courthouse. They sell it to him usually 20 cents per gallon lower than what’s advertised to the consumer, what’s known as the “rack price.”

Add taxes and a small markup onto that initial price, and you get the gas prices everyone sees posted on the road. But usually gas station owners like Vannusdal only make a cent or two of profit off of each gallon.

“We get most of our profits from inside. If someone’s telling me making tons of profit off of gas, then they’re lying to you. If I have a major breakdown of one of my pumps, we’ve probably lost money for the month.”

The real money is in the chips, drinks and alcohol in the store.

“There is competition," says Jane Nipper, who helps inside the convenience store. "And Speedway, being one of the largest competitors, if not our largest competitor, we can’t compete on stuff like let’s say candy bars. And they may sell them for like 2 for 89 cents. We can’t buy in volume."

Speedway, owned by Marathon Gas, has numerous gas stations across multiple states. Speedway buys their gas, food and alcohol in bulk, which means they can beat Nipper’s Corner on price in many cases. So Nipper’s Corner has to find other ways to survive.

"We try to get to know our customers,” says Ben.

Being a big part of the community is the heart of what keeps Nipper’s Corner going. Dennis Nipper, the person who the gas station is named after, lays out a red lawn chair in front of the store just to say hi to community members that pass by.

“I sit right here in the chair with a coke and just watch the world. Everybody that comes to town has to come by this corner.”

WYSO Curious is sponsored by Proto BuildBar, proud supporter of curious minds.