The Price of Gasoline

One time, years ago, I stopped for gas at the 7 Eleven at the corner of Mesa and University. At the time, there were gas stations on three corners at that intersection. The prices at the Chevron station across the street and the 7 Eleven were about the same, about six cents higher than the Circle K. I asked the manager of the 7 Eleven about the discrepancy in prices.

He said, “We don’t compete with the Circle K. We compete with the Chevron station.”

Of course, he didn’t mean “compete.” He meant “collude.”

There’s an article in the El Paso Inc. this week that informs us that gasoline prices in El Paso are the highest in the state, despite El Paso being home to an oil refinery and being serviced by a number of pipelines. The intrepid reporter David Crowder attempts to find out why, with so much oil infrastructure so close, El Paso has the highest gas prices in Texas.

For much of this summer, and for reasons that are hard to find, El Pasoans have been paying the highest prices for unleaded gasoline in Texas — and not by a little.

Last week’s price per gallon averaged a little over $2.66 across the city, according to the American Automobile Association and the onloine price checker,

That was 19 cents higher than the average in Texas, but slightly lower than in New Mexico and the national average of $2.67.

Well, there must be a simple explanation, right?

In an email exchange with El Paso Inc., Western Refining’s spokesman Gary Hanson wouldn’t attempt to explain why El Paso’s gas prices are so high.

“There are a number of factors that impact gasoline prices, and they vary by region,” he said. “That is why we don’t comment on specific prices.”

Mr. Hanson was a little more forthcoming (but not much) with the El Paso Times, in this story predicting that gas prices will fall to around two bucks a gallon by Christmas.

[He] said, since crude oil is the primary component in the cost of gasoline, if the price of oil goes down, the price of gasoline will go down accordingly. The price of gasoline is “driven by production and the price of crude.”

Think you can milk your current tank till Christmas?

Classic economic theory holds that in oligopolistic markets, suppliers will set a price above the price that would be set in a perfect market with multiple suppliers. Fair trade laws prohibit the gas suppliers from discussing next week’s prices, but a drive around the city would quickly inform any of the smaller suppliers of the pricing strategy of the price leader.

I don’t know which supplier sets the prices in El Paso, but I have to think that Western Refining, with a refinery in the middle of the city, could easily beat any of its competitor’s prices if they were inclined.

Gasoline prices are like taxes. They affect the price of almost every other commodity in the region. A decrease in gas prices means more money for consumers to spend on other things, thereby creating a broad economic stimulus in the region.

Of course, it’s not Western Refining’s job (or the job of any of the other suppliers) to stimulate El Paso’s economy. All of the suppliers are obligated to deliver profits to their stockholders. But in the long term, wouldn’t the suppliers be better off if the area enjoyed a vibrant economy?


  1. I am currently visiting San Antonio, and I can offer first hand confirmation that we paid less for gasoline on our road trip over here in places like Ft. Stockton and Kerrville, than I had paid to fill up at Walmart in El Paso, the night before we drove over. I do recall some years ago that Western Refining’s excuse for El Paso’s higher costs had to do with the fact that the local refinery is so old, and the method used to produce gasoline costs more than modern methods. As I recall, there was no mention of any so foolish as perhaps an effort on their part to modernize. As for competing, I also recall that all gasoline sold in El Paso was coming out of the same refinery (going back to when we had two refineries, Texaco competing with Chevron), and the only differences in brands had to do with whatever additives were included. So, iow, essentially all retailers were paying the same for their wholesale supply. I have not seen any information to change that over the years. None of this helps, but this is the story as I recall.

  2. I believe there is no competition for WR and they can charge what the market will bear…Capitalism! Gas is less in the lower valley than the West-side.

    VS. the Federal government to drive up cost with EPA regulations…Socialism.

  3. what he didnt tell you Rich Wright is that the refinery in el paso is mostly dedicated to producing Avgas, aviation fuel and Fosters refinery in farmington, aztec and up there in the four corners region is primarily dedicated to regular gasoline, this is what i was told by an actual worker for Giant. maybe its a lie but i feel its true. the price gets lower as the trucks descend into el paso. whatever it is, im glad that it was 2.40 at costco. last may it was 1.99 at pilot in anthony.

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