Here’s what determines the price of gasoline in the Tulsa markets

Here in the Tulsa area, we have been subjected to numerous rather large (and frequent) variations in the price of gasoline at the pumps. A number of individuals, both in and out of the media sources, have pontificated on the reasons, most attempting to place blame on “greed” on the part of the marketing companies and/or station operators. Actually, there are a number of factors that can and do have an effect on what the price at the pump (PATP) ends up being on any given day.

Having grown up with a Dad personally involved as an executive in the marketing end of the business in a semi-integrated oil company, it was natural that I would be exposed to the ins and outs of that part of the business. Then, as a career, my focus was on the exploration, production and transportation of the crude oil and natural gas for 50 years (before disposing of the last production operations in 1999). The decision to abandon a business truly enjoyed and loved was reluctantly arrived at by the increasingly numerous, onerous and expensive need-to-comply-with regulations, along with the unfair and selective way in which they were applied. It just had ceased to become fun any more and was decreasingly profitable.

Many demagogues in politics and media seem to make hay by accusing the major oil companies of price gouging and manipulating markets. They, in my opinion, are acting out of malicious envy or total ignorance of the facts of life of the business. They love to claim that the greedy oil companies are reaping evil profits from the poor consumers. Recently a story appeared in a trade publication, which compared their profits, per share of stock, with leading companies in other businesses. It turned out that the oil company profit levels were the lowest and were several percentage points lower than other businesses, such as Nike and Microsoft.

At the local level, we still have the what-traffic-will bear pricing operation. Here in the Tulsa area, it is obvious that QuikTrip is the leading marketing company. They do not, so far as is in my information, own oil and gas production or refining and so are classed as “marketers” and must buy their gasoline from refining companies at market price or under contract at a price fixed at so much above the price of crude. Naturally, it is necessary for them to make a profit or they will go out of business. It would appear to me that they are the ones setting the price of gasoline in the area.

It still is clear in my memory how my Dad would complain about small pricecutter marketers selling under the markets and starting “price wars” – which of course were welcomed by the consuming driving public. In those days, the 1930s, prices varied in the range of $.08 to $.12 per gallon, without the present $1.99 plus 9/10ths pricing done for the time since the invention of the metering and pricing pump machines. These small marketers naturally had much smaller staff overhead costs than the large companies. A few even had their own small refineries, many of which produced a lower quality gasoline and no lubricating oil.

Back to this time, if the price goes up $.10 per gallon overnight, the wise consumer should look for a station that has not raised its price, since it might be privately owned and has not heard of the price jump or has decided to try for more volume of sales (if his purchase price has not gone up yet). Some in my knowledge circle raise or lower their price when a new load of gas is delivered, so that their profit margin in the sale remains the same.

Another hint – A delivery tank truck driver friend cautioned me several years ago to wait at least two hours after a delivery to buy gas for the vehicle, to allow the storage tank sediment to settle out and not get into the vehicle fuel tank.