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Industry Insight

Gas Pains

Here’s a question to ponder,

By Richard Romano
Published: March 9, 2012

Here’s a question to ponder, but not for too long: why do gas stations post their prices? After all, there is no federal law that requires it (only a scant few states, such as New York, do), and wouldn’t selling outrageously priced gas be easier if customers didn’t know in advance what they were paying? I wouldn’t go as far as those e-commerce sites that require you to put an item in your shopping cart before they’ll tell you the price (which is just obnoxious), but just about every other type of retail location only advertises the price of sale items—is gas ever on sale? It turns out that gas stations are simply upholding a tradition, and in fact in those rare cases when a station doesn’t post their prices, it sets a movement afoot to enact a law requiring it. We all know people who drive around looking for the best deals on gas. Make sense? Not entirely: “Ten minutes of driving at 45 mph covers 7.5 miles and (with 30 mpg and $4 a gallon gas) uses a quarter of a gallon. So you’re spending a buck to save 50 cents on a 10-gallon fill-up.” Maybe it’s the hunter-gatherer in us. It bears mentioning that, in strict environmental terms, even $5/gallon gas is way too cheap, since the idea is to get people to drive less which will reduce the environmental impact of the automobile. And that is why, some say, that gas will not top out at more than $5 gallon any time soon, as it may stimulate “demand destruction,” or an active attempt to search for alternatives to driving. (I doubt it, but hope springs eternal, and there are a great many places where not driving is not an option.) The remaining question then is, why the fractions of a cent?

Please offer your feedback to Richard. He can be reached at richard@whattheythink.com.



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