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Special Report: Gas Price Mystery Solved

By Maria Garcia
Published On: May 18 2012 11:26:11 AM CDT
Updated On: May 18 2012 11:36:49 AM CDT

Reporter: Maria Garcia

EL PASO, Texas -

It's one of the biggest mysteries. How do gas stations determine gas pricing? And why is it that some areas of town have significantly lower prices than others?

"I still can't figure it out why we pay more than other people," said one man while putting gas in his vehicle.

Perhaps you've grappled with the same frustration. You pump gas at one gas station, drive across town - and bam - there's a place with way cheaper gas.

Sometimes, it's 20 to 30 cents cheaper.

"It's killing me, that's all I can say," one customer said.

Gas prices are determined by three major factors: Income, inventory, and competition.

"I'm not sure why they do it that way. I guess certain areas have the richer people," was how one customer theorized gas prices are determined.

"Frequently, where you have higher income levels, which have lower densities of retail gas stations, you can have more pronounced gas differences," said Dr. Tom Fullerton, an expert on business supply and demand.

Pronounced gas differences means more affluent parts of a city - in this case - West El Paso - usually have higher prices.

This happens, in part, because the gas stations in these areas are generally more spread out. For example, on the West Side right now, the price of regular unleaded ranges from $3.64 to $3.71.

And it can be frustrating, which leads to the second factor - inventory.

For example, in Downtown El Paso on Paisano, you will see lots of people driving by but not a lot of gas stations.

"Areas where there's a lot of automobile traffic, tend to have higher sales volumes and those areas will see their sales volumes depleted more rapidly," Fullerton said.

The less gas they have because of so many customers buying it, the more prices will go up.

Then there's competition. Gas stations are clustered together gas stations are on the East Side and they have the cheapest gas in the city - from $3.51 to $3.57.

If you have a major intersection that has four major gasoline stations located on it, the prices on that intersection are probably going to be lower than at an intersection that has only one gasoline station.

So the question is, how far should you drive to reduce that oh so familiar pain at the pump?

Fullerton said it doesn't make economic sense to make a trip across town to save a few bucks. But a few miles?

"If they're located in Sunset Heights, and they discover that on festival, there's a very low gas price available to them, that might make sense because it would only take 11 or 12 minutes to get there," Fullerton said. "Especially if you can combine it with a trip to the grocery store.

So just remember, try to head where there's competition.

Fullerton said basic gas prices are determined by the distributor and oil company but local gas station management can alter it a bit - based on inventory and competition.

Find El Paso area's lowest gas prices at http://www.kvia.com/news/pump-patrol

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