The Variability of Santa Barbara Gas Prices

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The Variability of Santa Barbara Gas Prices
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By Sonia Fernandez, UC Santa Barbara

Those of us who drive regularly are keenly aware of gas prices and their daily fluctuations. Many of the factors that influence the price per gallon — the cost of crude oil, regional taxes and processing and transportation charges — affect all pumps in a given area. Why then do some stations charge more for fuel than others in the same general geographic location? 

This was the question UC Santa Barbara geographers Alan Murray and Jing Xu sought to answer when they conducted their survey of gas prices in Santa Barbara County. Using a spatial analytic framework incorporating exploratory spatial data analysis, remote sensing, geographic information systems and spatial statistics to explore data from the real-time gas price app Gas Buddy, they investigated how the locations of these pumps could influence the prices they charge.

“We were interested in looking at the spatial features in and around stations, and whether there was any predictability to pricing variation,” said Murray, who with Xu authored a paper in the Asia-Pacific Journal of Regional Science. Over the two weeks of their study, the researchers examined features related to land use and socioeconomic conditions, performed onsite observations and assessed the individual stations’ proximity and connectedness to features of the built environment, such as roads, shopping centers, schools and other gas stations.

A few of the results confirm what we all might intuit: Proximity to highly trafficked areas can influence higher gas prices.

“You’re always going to pay for convenience,” Murray said. Stations near shopping centers (within 2.75 miles) and major thoroughfares tended to charge relatively higher prices, likely targeting shoppers and visitors who were already there for another reason.

“People usually do not travel just for gas,” Xu said. “We travel for work and for school, and we’re filling our tanks while doing other things.” This could explain, for instance, why one station in the Santa Ynez Valley near a small local airport might have relatively lower prices than a counterpart in the same vicinity that is closer to shopping and restaurants, she said. “The one with higher prices is likely to provide more direct access to food and goods.”

Likewise, stations closest to freeway on- and off-ramps tended to charge more than those located on the interior streets of a municipality. And, of those stations near the freeways and highways, the ones at the interfaces between urban and rural areas tended to charge more.

“If you enter from a rural area to the urban area, or leave from the urban area to a rural area, that urban fringe location usually has higher prices,” Xu said.

Among the factors that might dampen prices, according to the researchers, is a rural or relatively less urban location, the presence of a carwash or convenience store, ownership by nearby supermarkets and proximity to other gas stations, which indicates market competition. In fact, the nearby presence of market competition is among the most significant determinants of pump prices, and can override the effect of proximity to nearby food and goods.

“Modeling-wise, the pricing behavior of one station is not independent of others,” Murray said. “What we found is that the pricing of your closest competitors matters in terms of your own pricing behavior.” This happens irrespective of whether the station is a major brand or a lesser-known retailer, he added, and despite the notion that major brands offer “better” gas (though it is also true that major brand stations generally price their gas higher than minor brand stations).

The researchers found some interesting outliers in their survey. Among them is a gas station in Carpinteria, which, while located closer to the center of town, charged more than its counterparts closer to the 101 freeway. That pricing could be taking advantage of its proximity to the business and tourist district, they surmised.

“If you’re just coming up the coast, it’s one of the most populated areas you first encounter, and it’s in a beach community,” Murray said.

But by far the biggest outlier is a gas station located in western Goleta, situated just off the 101 freeway, whose prices were roughly 68 percent higher than the county average. At the time of the study, that equated to about $2 more per gallon than other stations in Santa Barbara County.

“We were very interested in price gouging behavior,” said Murray, who defined it in this case as taking unfair advantage of a location to set excessive prices. Indeed, the station in question has good freeway access, and is the last major gas brand along the freeway between western Goleta and Solvang.

“You have sort of a captive market,” Murray said. One of the local characteristics is its location near Dos Pueblos High School, where “young drivers maybe don’t appreciate” the huge discrepancy in gas prices, he added.

“You also have this traffic coming off the 101, going over to Home Depot and Costco, so you have a mix of people that are patronizing the local area and are therefore captured on their journey to goods and services,” Murray said. All this, he noted, despite the fact that the surrounding suburban neighborhood is relatively less affluent than other, more expensive neighborhoods that have gas stations with more average pricing. This is an important point, he added, in the sense that “this higher, predatory pricing might be impacting certain socioeconomic groups more than others.”

Deeper investigation revealed that the markedly higher prices at that station in western Goleta might also be turning away customers. Onsite observations demonstrated that the majority of visitors to the gas station came from the 101 freeway, supporting the speculation that the target customers are those coming from the highway. The researchers noted that most of the customers either limited their purchases to items from the convenience store or they left the station without buying anything.

Gas station owners have myriad reasons for choosing to set their prices one way or another, and not all of them are location-specific. But this study, the researchers say, “offers a first attempt at detecting normal gasoline pricing behavior, and the spatial factors associated with these conditions.” As they note in the paper, “The hope is that this work provides government agencies, urban planners and policy makers with capabilities to investigate regional gasoline price variation and potential gouging behavior.”

Learn more at news.ucsb.edu

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PitMix Mar 07, 2019 03:32 PM
The Variability of Santa Barbara Gas Prices

I've always wanted to know why prices shoot up in response to a refinery outage or fire or switch to summer blend, but take a long time to come back down once the disruption is over. That seems very odd. In a true free market, the price rise and fall would take about the same time.

Lucky 777 Mar 07, 2019 11:25 AM
The Variability of Santa Barbara Gas Prices

Decades ago I was called to a jury for a lawsuit about this, one of the franchise owners at the Fairview/Calle Real corner was suing his parent company because he was being charged more per gallon than a gas station just blocks away was paying, that was the same company but it was wholly owned by the company, not a franchiser. So that's an invisible factor not addressed in this academic study. You should have seen those corporate lawyers in their expensive suits, big dollar sharks.

RHS Mar 07, 2019 10:35 AM
The Variability of Santa Barbara Gas Prices

Gasoline prices in CA are higher than elsewhere primarily because there are only three refineries in the state. Since we use specially formulated fuel there is no outside state competition as in the South and elsewhere to drive the price down. CA refineries are notorious for closing down for "updates" and such creating a shortage of product which they use to justify higher prices than elsewhere. Studies (LA Times recently) have demonstrated that about 50 cents a gallon is due to the mysterious refinery cost. In other words it is not the profits at point of sale that makes the big bucks for these companies but the earlier charge passed on to the retailers that gets them fat as pigs. Attempts to stop this have been deferred and delayed in the Legislature due to big lobbying and contributions by the oil industry. Don't hold your breath for any change soon.

macpuzl Mar 07, 2019 09:49 PM
The Variability of Santa Barbara Gas Prices

According to ============================================================== https://www.energy.ca.gov/almanac/petroleum_data/refineries.html ============================================================== as of January 2018 there are 16, but only 11 can produce gasoline.

a-1568636093 Mar 07, 2019 09:01 AM
The Variability of Santa Barbara Gas Prices

Wasn't it YOU who voted in the new gas tax? So how are all those road repairs coming along? Oh, I see, the money wasn't meant for roads.

jak Mar 07, 2019 08:25 AM
The Variability of Santa Barbara Gas Prices

Now someone should explain why even the lowest prices in Santa Barbara are so high. $3.40 per gallon average for Goleta?? My friends in Greensboro NC are paying $2.25 average per gallon. And North Carolina is the laughing stock of the South because of its high gas taxes. Here in rural Mississippi we pay under $2.20 per gallon and if I buy gas when I go to the city I can find it for under two bucks. Gas and food prices are an aspect of paradise on the beach that we will never miss.

ZeroHawk Mar 07, 2019 09:47 AM
The Variability of Santa Barbara Gas Prices

thats because California uses a different blend of gas than what they use in the southern states. We also have a winter blend and summer blend of fuel. It's quite different than in the Carolinas. Costs a bit more to manufacture. Idea....go green, get a hybrid. That helps with the gas prices. Alot!

Factotum Mar 07, 2019 09:10 AM
The Variability of Santa Barbara Gas Prices

You need to visit Mississippi before you continue with your misinformation campaign. Calif K-12 (#45) barely outranks MS (#48) - explain that one. MS is not even close your stereotyped views of this state.

SantaBarbaraObserver Mar 07, 2019 08:49 AM
The Variability of Santa Barbara Gas Prices

Considering that MS is near last in almost every meaningful statistic (education, economic, infrastructure, upward mobility, etc), it appears that MS is simply incapable of funding its own needs. Its also why its one of the biggest "Takers" in the nation taking far more in Fed funds than it gives back... So you can have your cheap fuel, but you're paying for it in almost every meaningful way. And obviously, the great state of MS has chosen not to fund or educate their people with basics in economics and math, for something as simple as this question would not have been presented if the population of MS actually knew what was happening... In the meantime, there is no crime to charge more for fuel unless there is an emergency in play. If you're dumb enough to buy $5 a gallon when its $3.33 down the street, that's on you. In the same way you can buy a burger at McDonalds for $1 or one at the Bacara for $30. It's wholly up to the buyer.

RHS Mar 07, 2019 08:24 AM
The Variability of Santa Barbara Gas Prices

OMG, this is what passes for academic achievement and research today? Every young driver on a budget that I knew growing up (and that was every young driver that I knew) knew these things from early on. High prices for people with no information about alternatives and those in a hurry pulling off the highway. Low prices in less affluent neighborhoods. High prices where drivers were on business expense accounts or just didn't give a rip about the cost of such mundane stuff. I trust this "study" is not receiving national praise. (And, really, is it "price gouging" when no one is forced to pay the higher cost?)

a-1568636093 Mar 07, 2019 09:57 AM
The Variability of Santa Barbara Gas Prices

Zerohawk - which ones? You make it sound as if no one lives "way out there." Have you ever been "way out there" on a weekend? The traffic is far worse than downtown (and it doesn't reek of urine). Plus, the folks who do live "way out there" use the gas stations all the time. Yeah, the Mobil station is odd seeing how expensive it is, but it always has customers. So, which "suspicious" gas stations are you talking about? I'm really curious!

a-1568636093 Mar 07, 2019 09:55 AM
The Variability of Santa Barbara Gas Prices

Holothuroid - nice try. It's a Mobil station. Mobil has plenty of money to keep a gas station open with minimal customers. I live near there and there's always at least 1-2 cars there both times I pass it every day of the week.

ZeroHawk Mar 07, 2019 09:48 AM
The Variability of Santa Barbara Gas Prices

a few of the gas stations way out there seem suspicious, i agree, no customers but have been open for a very long time....maybe they make rent by snacks and gum...nah...

Factotum Mar 07, 2019 09:12 AM
The Variability of Santa Barbara Gas Prices

Do you see a high number or government license plate vehicles at that Glen Annie station -do they have a contract for government vehicles?

Flicka Mar 06, 2019 04:12 PM
The Variability of Santa Barbara Gas Prices

Don Risdon's 76 station in Carpinteria is directly off the freeway, incredibly easy off and back on. His prices are always lower than most others. Does a huge business.

kids Mar 06, 2019 03:36 PM
The Variability of Santa Barbara Gas Prices

I totally agree with COASTWATCH. My kids were UCSB students over a decade ago. When they had my credit card, that's where they went. Total highway robbery!! When I realized this, I gave them cents/mile. Good lesson! They never went there again. Shame on these people!!

SantaBarbaraObserver Mar 07, 2019 08:56 AM
The Variability of Santa Barbara Gas Prices

The price of fuel is on the marquee, its not like they're hiding it. If the Chevron station was matching their price, we'd have a collusion issue. But they're not so it falls on the individual to read and decide where to buy fuel. It's crazy to think that a kid who can get into UCSB cant do basic math...

CoastWatch Mar 06, 2019 11:56 AM
The Variability of Santa Barbara Gas Prices

Both the Mobil and Chevron off Glen Anne / Stork are pure criminal in their gouging. They absolutely count on "Mommy & Daddy" footing the credit card bill while attending UCSB.

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