May 12, 2006 - Station ED-entification

The dedicated staff of edhat.com used to drive past all the gas stations in town to gather prices for our gas price map. One of the reasons we stopped doing it was because prices were increasing rapidly, and we thought that maybe we had something to do with it. In the same way that watched pots never boil, maybe watched prices always rise.

Well after we stopped watching, the prices continued to rise. So, it turns out it wasn’t us. Maybe we should have considered the possibility that prices were going up because of the basic economics of supply and demand, or maybe a failed foreign policy, or maybe one that didn’t fail.

Whatever the reason, prices are now more than double of what they were two years ago when we started our map. And with prices so high, gas prices are a hot topic of conversation around the water cooler. Getting the lowest high price has become a top priority for many people. Today, they announced the cheapest places to buy gas on TV and the radio. There are also a number of websites with their own price maps.

Yesterday, the dedicated staff wanted to see how this new price awareness has affected consumer behavior. Everyone in town knows that eggs, butter, cereal, chicken, and motor oil are much more expensive at Gelson’s, but people continue to shop there. Ed wanted to know if this same type of price ambivalence applies to gas as well.

The intersection of Mission and State seemed to be the perfect place to study this phenomenon. Yesterday, on the east side of the intersection, Mobil was charging $3.59/gallon for regular. And on the west side of the intersection, Arco was charging $3.33/gallon – one of the lowest prices in town. Ed instructed the dedicated staff to go to Mission and State and count the number of cars filling up at each station.

It didn’t take long to figure out what was going on. When we arrived, the Mobil station was as empty as Campus Point on a wave-less day, while the Arco pumps were all in use. The line for Arco extended out into the street. At Mobil, you could pull right up to the pump, swipe your credit card (the one that saves you over $0.10/gal because it gives you 3% off on gas), and start filling up. At Arco you could wait 3 or 4 minutes for a pump (worrying that someone else who got there after you would snake you), wait in line at the cashier to pay cash, and struggle with short hoses. But, saving is so important right now - price trumps convenience.

Ed notes that with prices so high, a couple of pennies of saving actually matters less than it did before prices went up. This is because those pennies are a smaller percentage of the total price. The expression, “penny wise, pound foolish” seems appropriate here.

Another explanation is that gas-saving mania is not about the price at all, but instead, about fairness. The general perception is that gas prices are unfairly high right now. With the big, bad oil companies showing big profits, paying another $0.23/gallon would be like putting a sign on the back of our pants that says, “Kick me.”

Overall, we witnessed 50 cars fill-up with gas. A whopping 48 of them were at Arco, only a measly 2 were at Mobil. That’s 96% of business going to the lowest bidder. All of our subscribers (expect the one who inexplicitly guessed 120%) didn’t guess high enough. The highest guesser was Petern. Life is a gas, gas, gas for Petern. He wins an Edhat t-shirt.

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