Looking for a deal on gas? Drive around

Friday, May 24, 2013, Vol. 37, No. 21
By Joe Morris | Correspondent

Nothing kills a good mood like filling up the tank and seeing gas a nickel cheaper two miles down the road.

For some, finding the cheapest price per gallon is not just a matter of thrift: it’s a lifestyle choice. Phone apps are deployed. Websites are bookmarked.

And still, every so often, that elusive lowest price is just out of reach.

In Middle Tennessee, savvy buyers know the best prices are usually found along Smyrna’s Sam Ridley Parkway, as well as Hendersonville and Gallatin.

Conversely, buyers in Brentwood, West End and Green Hills are usually paying the highest prices in Middle Tennessee, though relative bargains can be found along Charlotte Pike in the Nashville West shopping area.

Most people have figured out that gas stations near an interstate highway interchange charge more than those on a neighborhood corner, but there are other factors at play.

“In large part, gas prices at any location are keyed to what the market will bear,” says Don Lindsey, Tennessee director of public affairs for AAA.

“A station that attempts to go up a few pennies might find its share dropping off to nearby competitors, and so they’ll wind up dropping back as much as they can. The goal is to bring people in and to keep market share.”

Marketing plays a heavy role, as well.

If a station has four-foot letters on a sign out front advertising their price, even if it’s just two or three cents cheaper, it will likely pull in customers that might have been headed elsewhere.

It trims their profit margin, but there are other ways they can compensate for that.

Take Z Mart in East Nashville. The Gallatin Pike convenience store took over from another vendor six months ago and routinely has every pump filled, with a line, thanks to prices that often are as much as six to seven cents lower than anyone else within a few miles.

“We don’t make as much profit, but we make up for that inside because we have more people buying other things while they are paying for gas,” says Chad Ayesh, manager.

The store buys gas frequently thanks to its traffic, so there’s money being made in overall volume as well, Ayesh adds.

At a higher level, gas pricing also has to do with global supply and demand, not to mention pricing structures at the wholesale level.

“If a station has a contract to buy its gas from a specific source, and is locked into a specific price, there’s not much they can do with their pricing,” Lindsey explains. “If they can go on the open, or spot, market and shop for gas, they sometimes can get a lower price, and that’s reflected at their pumps.

“But I’ve seen that work against them after something like a hurricane because then the spot market goes much higher than a contract rate.”

Time of year also plays a role, but those fluctuations are reflected across all vendors.

Refineries shut down many of their operations in the spring to switch to a summer blend of gas that is usually cleaner-burning than what’s produced for winter months.

That’s a costly process, and it means there’s less gas available. It also usually ends up causing a gas spike around Memorial Day, Lindsey says.

“It’s a volatile market, but a very common pattern is that gas prices will hit a springtime high, and then fall into July as that changeover is completed,” he says. “In the fall, it will rise again, because they are changing back to production for the winter blend.”

But, he is quick to add, there’s no guarantee either way.

“This year we’ve seen falling prices in much of Tennessee since February, and right now we’re at the second-lowest prices in the country; only South Carolina is lower,” he says. “But that could change in the next 20 minutes.”

Lastly, there’s the human factor. Crude oil supplies are at an 82-year high, Lindsey says, but economic and other fears are keeping gas price levels higher than this situation would normally indicate.

“There’s the economy, and some scary news out of the Middle East, and people think that might affect supplies,” he says. “If not for those factors, we probably would see lower prices.

“The commodity markets, whether it’s oil, corn or pork bellies, are driven in large part by happy or scared consumers. And right now, there’s a lot of emotion that’s keeping gas prices elevated.”