Why Do Gas Prices Vary So Much, Even a Few Miles Apart?

We did some digging for you.

If you’re searching for the lowest gas prices in Milwaukee County, you’ll probably find yourself shocked at the difference a few miles can make. Stop by the Mobil on Good Hope Road and 43rd Street, and you’ll  find regular gas for $2.39 a gallon. Head less than 10 miles west to the Woodman’s in Menomonee Falls and gas will be only $1.75. 

One possible reason for the big difference: COVID-19. 

“With fewer people driving, stations aren’t turning over their inventories as fast,” says Nick Jarmusz, AAA’s Midwest director of public affairs. “[Stations] will not adjust their prices to lower than they paid for the gas.” 

That means service stations who bought their gas weeks ago at high prices and haven’t been able to sell it all won’t lower the price to match their competitors, or they’ll lose money. Other stations that bought low can afford to sell cheap. 

— Sponsored Video —

Although COVID is a contributing factor in the current wide price spreads, variations aren’t unusual in major cities, says Patrick DeHaan, head of petroleum analysis at GasBuddy, a Boston-based tech company that tracks fuel prices. On the outskirts of Chicago, he says you can buy gasoline for $1.89 a gallon, while the price is $3.39 in, say, the Loop. High demand, low competition, the cost of real estate and more drive these differences. 

But Wisconsin prices have historically been more consistent, owing to a 1939 law known as the Unfair Sales Act. The law mandates that goods like groceries, alcohol and gas not be sold below cost, which means gas has to be marked up either 6% over cost or 9.18% over the local wholesale price, whichever is higher. The law was meant to protect small Depression-ravaged businesses from being priced out by large ones that could afford to sell at a loss. 

Gov. Tony Evers proposed repealing the act’s application to gas in his 2020 budget in exchange for an 8-cent-per-gallon hike in gas taxes, but that portion of the budget failed to pass. 

If you’re on the search for the lowest prices around (and Illinois is a savings-offsetting drive), then your best bet is likely supermarkets. DeHaan says gasoline sells for less at supermarket service stations because those retailers want to attract people to shop inside the store. “Costco wants to be a one-stop shop to get you to buy all of its stuff on the inside.” 

With COVID still driving price fluctuations, it’s also worthwhile to search your neighborhood’s offerings on services such as GasBuddy. According to DeHaan, the average American motorist annually buys about 600 gallons of gasoline. A consistent difference of just 30 cents per gallon could add up to $180 in savings – enough to justify a celebratory post-COVID road trip.


This story is part of Milwaukee Magazine‘s February issue.

Find it on newsstands or buy a copy at milwaukeemag.com/shop

Be the first to get every new issue. Subscribe.

Comments

comments