On a sunny Saturday at the Fisherman’s Bend gas station back in February, Juneau resident Joyce Sepel was filling up her tank. She said the Auke Bay gas station is her favorite.
“I’ve been going to Fred Meyer because it was cheaper,” she said. “But now I’ll just watch. I like coming here. It’s convenient, and I love watching the water here while I do it. But they’ve been the most competitive during the winter.”
On Valentine’s Day, prices at Auke Bay stations were cheaper than elsewhere in Juneau — as much as 40 cents cheaper. De Hart’s charged $3.50 per gallon, and the Fisherman’s Bend station charged $3.51.
Meanwhile, Mike’s Airport Express was charging $3.70 per gallon. Petro One was charging $3.58 at its Lemon Creek station. Downtown, the Delta Western station was charging $3.90.
Some listeners have asked us why gas tends to be cheaper in Auke Bay. For her last Curious Juneau, erstwhile KTOO reporter Katie Anastas decided to find out. And as a bonus, she took on another reader question: Why does it cost more to fly to Ketchikan than to fly all the way to Seattle?
Catching drivers before they head south
Matthew Lewis is an economics professor at Clemson University. He studies how gas stations compete with each other, and how consumers respond to that competition.
“If consumers are driving or commuting a fair distance, they’re probably passing more gas station options along the way,” he said. “So that gives much more flexibility in where consumers might purchase.”
If someone lives in Auke Bay and drives to Lemon Creek or downtown for work every day, that driver passes by a lot of gas stations. Lewis said the Auke Bay stations need to keep prices low to try to catch those drivers before they go south.
“It is on the outskirts of where people are,” he said. “It’s not a convenient location for a lot of people, and so they need to have a relatively low price to stay competitive. Stations on a prominent, convenient part of a heavily traveled road or downtown can charge a high price and many consumers will still go.”
But gas stations do compete within neighborhoods
More broadly, four things affect the cost of gas, according to the U.S. Energy Information Administration. The biggest is the cost of crude oil, which makes up more than half of the retail price of gasoline. Lower oil production drives up crude oil’s cost per barrel.
Taxes and the costs of refining and distribution make up the rest.
As those costs change, so do the prices at the pump. But ultimately, Lewis said, stations decide how much they think they can charge.
When the crude oil and refined gasoline prices go up, the stations have to raise their prices and they do so fairly rapidly,” he said. “But when oil and wholesale costs go down, the stations tend to be a little bit slower to lower their price.”
Lewis said competition drives stations’ prices, even within the same neighborhood. Back in October, the Juneau Empire reported an 80-cent per gallon difference between the two Auke Bay stations.
“Prices do change regularly, so consumers really often aren’t all that well informed about what different stations are charging at different points in time,” Lewis said.
So next time you need to fill up, call around to a few stations. The lowest price could be closer than you think.
Along those same lines…
Have you ever wondered why it’s sometimes cheaper to fly from Juneau to Seattle than to Ketchikan? Some of our listeners have.
Alaska Travelgram writer Scott McMurren answered us with a question: “How many airlines fly between Juneau and Seattle?”
There are two.
“So Alaska and Delta compete on that route, particularly in the summer,” McMurren said. “The next question is, how many airlines offer jet service between Juneau and Ketchikan?”
For jet service, there’s just one.
Like gas prices, it comes down to competition. Multiple airlines will compete for customers. But if one airline has a monopoly on a route, like Alaska Airlines does from Juneau to Ketchikan, it’s up to them to set the price.
Curious Juneau
Are you curious about Juneau, its history, places and people? Or if you just like to ask questions, then ask away!
