Prices are Affected by Taxes

• Perhaps the largest contributor to gas price differences by location is the variation in local taxes. The price of a gallon of gas may contain as much as $1 in state, county and local taxes, and municipalities with higher taxes will have, as a result, higher gas prices. Gas stations in municipalities with lower gas taxes pass these savings on to customers in the form of lower prices at the pump.
  
  

Transportation Costs Affect Gas Prices

• Distribution of gasoline in a given area generally occurs from a central distribution station. Fuel tanker trucks fill up at the distribution station and truck the gasoline as much as a few hundred miles to the station where the gas will ultimately be sold to the consumer. The further the gas station is located from the distribution center, the more the gas costs to transport to the station and, as a result, the more the gas costs per gallon.
  
  

Gas Stations Consider Their Competition

• When a gas station sets its prices, the station owner considers factors such as the wholesale price, local taxes and other overhead costs. Before the final price is set, though, many stations will conduct a survey of prices at competing stations. If competitors are charging higher prices, a gas station owner may raise the sales price to reflect the average local price in order to increase profits. If nearby competitors are charging lower prices, though, stations owners will sometimes take a loss on the sale of gasoline in order to remain competitive.