Wednesday, September 6, 2017

Gasoline Prices: The World Turned Upside Down

Wait! What's going on? The Raceway and Valero north of Finnegans Lane always have the cheapest price around here, right? And Exxon is always the most expensive. Well, the Exxon part is still true. But now Raceway and Valero, which are practically across the street from one another, are the same price as Exxon. But wait--if you pay using a credit card, then Exxon is cheaper than Raceway and Valero.

Since Hurricane Harvey shut down some refineries in the Houston area, gasoline prices have, of course, risen in New Jersey, as they have around the country. At the Raceway, just north of Bennington Parkway/Finnegan's Lane, the price jumped 40c/gallon to $2.799 (cash price) from $2.399. 

As of noon today (Wednesday, Sept. 6),  the lowest gasoline price $2.749 (when you pay cash) at Valero on 27 South.

At the BP on the corner of Finnegans Lane, the price is now $2.759/gallon. Again, it's unusual that BP's price is lower than the Raceway's. The BP at the corner of Allston Road and Sunoco, both close to Route 518, are selling gas at the same price as the Finnegans Lane BP.

Sunoco just north of Route 518

    How to account for the discrepancies? For one thing, there may be two different products they're selling. When I stopped at the Finnegans Lane BP earlier this week, I noticed a label on the gas pump, "May Contain Ethanol."  Ethanol is cheaper than gasoline. According to Business Insider, today's price for ethanol is $1.57/gallon. The average price for a gallon of regular-grade gasoline today is $2.80, according to the website GasBuddy. That's a big difference. So some of the refiners may be adding ethanol to the mix.  If you notice your miles-per-gallon decreasing, that's probably the case.

Then there are the dynamics of fuel retailing. Here's how it works. Branded fuel (such as BP, Exxon, Shell) costs more because there are more costs inherent to the product, such as advertising, research and additives. Unbranded fuel retailers rarely advertise and don't include additives in their fuels, so they sell at a discount to branded fuel.
A hurricane can mess with the supply/demand unevenly. A lot of gasoline is refined in the Houston area, and many of them had to shut down for awhile because of the storm. Some may take longer to get up and running due to storm damage. About 20%-25% of U.S. refining capacity was disrupted by Harvey, CNBC says. This may have hurt the supply of unbranded fuel more than it did branded fuel. Therefore, when supply falls and demand remains the same, the price goes up. 

Of course, once the refineries are all up and running, the gas prices may all revert back to their normal order of things. Hurricane season isn't over yet, though.

Lucky for the Texas and Louisiana, Hurricane Irma doesn't seem to be heading their way, but does appear headed for Florida. That may actually reduce demand for gasoline temporarily. Tropical storm Katia, which formed in the Gulf of Mexico, is expected to make landfall in Mexico. Stay tuned. Gas prices could be in for bumpy ride this year.

Let me know what's going on in your business on Route 27 between Finnegan's Lane and Route 518. Email me at

Liz Kiesche

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