Motorists gassing up Friday at several Hess stations and 7-Elevens in New Bedford got one of the lowest prices around: $3.19 a gallon. But at a Shell station in Waltham the cost is considerably higher: 80 cents a gallon more.
While there is normally a gap between the high and low gas prices, the spread right now is unusually wide, and is caused in part by the speed at which prices in the overall market are falling.
When gas prices fall, as they are now, wholesale suppliers have a lot of leeway in how they respond: Some use the opportunity to drop prices immediately, hoping to recoup their costs through higher sales volume; others keep prices high for a time, to maintain profit margins and recover as much as possible if they are sitting on a batch of more expensive gas.
“If a guy has a lot of inventory, he’s going to be really reluctant to cut his price if prices start falling because he doesn’t want to lose money on the stuff he’s got in the tank in the ground,” said Kevin Lindemer, an independent energy industry analyst in Groton.
For Newton resident Carol Amidon, one gas station is just as good as another; so for her, price is the deciding factor. She gassed up Friday at a Sunoco on Elliot Street in Newton, where regular unleaded was $3.29 a gallon for those paying cash, and 10 cents more with a credit card.
“You go some places and their lowest price is $3.59 and others are $3.29,” Amidon said, “and you wonder why people are paying it.”
In the last two months, gas prices in Massachusetts have dropped by more than 30 cents; the average for regular gas is now $3.43 a gallon, according to AAA Southern New England. The organization also tracks the spread between high and low prices in the state, and put the gap this week at 66 cents. A separate tracking service, the fuel-finding website GasBuddy.com, said the spread between the the cheapest and costliest fuel on Friday was 80 cents a gallon.
Wholesalers often set different prices because each is “trying to guess the market” and interpreting market developments and political events that could affect oil differently, said Michael Lynch, president of Strategic Energy & Economic Research Inc. in Amherst.
Take Joe Petrowski, chief executive of Cumberland Farms Gulf Oil Group, a major Northeast fuel distributor with a network of 2,500 branded gas stations. He is constantly watching for developments that could influence prices.
“If a headline came across that Palestinians and Israelis are hugging each other, I would know oil prices are dropping and I would have a tendency to drop my price tonight,” Petrowski said. “I wouldn’t necessarily wait for prices to be down tomorrow. I would try to get ahead of it. If somebody has a cheaper price, I lose that customer.”
Ultimately, retailers have limited ability to change prices, especially when the typical station’s profit margin is only 10 to 15 cents. Moreover, some have higher fixed costs than their competitors that make it harder for them to react quickly when a competitor lowers prices.
For example, gas at the Trapelo Mobil in Waltham is frequently a few pennies higher than at another Mobil just down the street. One is a franchise; the second, with the lower prices, is owned directly by Mobil, which can afford to drop prices more.
“We have the same customers who travel the same road,” the Trapelo Mobil franchisee, Rich Campbell, said in frustration. “If you were a Mobil customer, where would you go?”
With limited ability to respond pricewise, Campbell said he instead tries to distinguish his station by keeping it very clean and providing a high level of customer service.
“It takes a long time to build up a good customer base,” Campbell said. “It only takes one bad experience to lose them.”