Why is gas priced so differently at fuel stations in the same region?

What causes price discrepancy at gas stations? CTV Windsor’s Sanjay Maru looks into why one gas station may have a better price, and if local drivers find it’s worth hunting around for.

At a Petro-Canada location in LaSalle, Ont., the price of gas sits at $1.69 per litre as of Tuesday afternoon. At the same time, a Shell location in Tecumseh, Ont., sells gas for $1.85.

As the price of gas continues to rise, drivers are paying more attention not just to how long this trend lasts, but also which fuel station they get their gas from.

"Stations buy gasoline every three to five days and the world market can change wildly over those days, resulting in stations all paying a different price," said Nicole Petersen of GasBuddy.com.

The world market, of course, is continuing to react strongly to sanctions on Russian oil issued by multiple countries across the globe and concern over limited supply from one of the world's largest oil producers.

But local factors also have an influence on fuel stations selling gas at different rates, according to Peterson, including "competition and branding."

"Selling gas isn't generally very profitable. Gas stations make very little revenue on fuel. Most of their revenue comes from items sold within their convenience stores," she said.

According to GasBuddy, the average net margin for fuel stations can be as little as one to two per cent on gas purchases.

"Fifty per cent of the cost of gas is strictly related to current oil prices. Retail costs only make up about seven per cent of the price at the pump," explained Petersen.

But while retailers want to price gas as low as they can in order to beat out local competition, it's not as simple as just selling gas for cheaper rates to undercut neighboring stations.

"The wild daily fluctuations in wholesale gas prices (markets) have left many smaller stations unable to unload the expensive gasoline they purchased last week," said Dan McTeague, president of Canadians for Affordable Energy, in a statement.

According to Natural Resources Canada (NRC), gas stations located in remote areas usually pay higher transportation costs to bring the gasoline from the refinery to the pump.

"Gas stations located in smaller communities sell less gasoline than those in larger centres and therefore need to sell their products at a higher price to cover their fixed costs. These stations also may not benefit from volume discounts offered by wholesalers," a statement from NRC reads.

"Some communities or neighbourhoods have more gas stations than others which results in more competition among stations. This generally helps keep prices lower than in areas with only one or two gas stations."

NRC adds that adding a car wash or convenience store can generate more income for the owner, giving them the ability to sell gasoline at a lower price and afford to do so.

Additionally, some gas stations may also be able to keep their gas prices high because they're located in high-traffic areas — and people don't want to drive to another station farther away.

But regardless of the decisions that individual owners make to adjust the price of the gas they sell, Kalibrate Canada senior consultant Vijay Muralidharan said we need to understand that there is a basic structure in place to get gasoline to the consumer.

"You have a refiner, you have a wholesaler, then you have a retailer," he said. "They could all be the same company in some instances. In other instances, they're all three different companies ... So you have a different permutation combination of work here."

According to Muralidharan, the prices that refineries and wholesalers charge to retailers can vary depending on the retailer.

"It all depends on when they bought the crude and when they bought the product. There’s so many things that are not very black and white," he said.

Drivers like Robert Dirisio say they've always been choosy about which station to get their fuel from.

"I look for a couple of gas stations and whoever has the cheapest gas, that's where I've been going," he said "Price for me is very important."

Ray St. Louis agrees, noting that "wherever it's a good price" is where he'll stop and fill up.

"Mostly, I just look around and pick out the cheapest," said St. Louis.

But in terms of what motivates some to fill up at a specific gas station, others continue to look for convenience.

"This station's really just close to home," said Lauri Taparluie while filling up a Petro-Canada station on Front Road in LaSalle.