In search of a $3 gallon of gas — or, why prices are (so much) cheaper in the South

A few gas stations near Morristown sell gasoline for less than $3 a gallon. But don’t look for them—unless you’re near Morristown, Tennessee.

A recent trip south showed that the price of a gallon of gas in Tennessee, Georgia and Alabama was significantly lower than in New Jersey. At least 50 cents a gallon cheaper.

And that cost difference can’t simply be tied to the lower price that comes with self-serve gas. Finally, in Pennsylvania, Maryland, and even Virginia — where self-service is the norm — prices were more similar to New Jersey.

Eric Blomgren, chief administrator and director of government affairs for New Jersey Gasoline, C-Store, Automotive Association, said there are numerous factors in the cost discrepancy — including the region’s proximity to the Gulf of Mexico and the tremendous amount of oil it produces .

“Because of the Gulf, they have a lot of refineries down there and infrastructure and stuff like that,” he said. “We have some refineries up here, but we’re more of the endpoint of the pipeline.

“We have to import some of our gasoline and diesel from overseas because we don’t have the capacity supply that they have down there.”

Blomgren also points out full service.

“The gas stations down there don’t have a legal obligation to have someone pump the gas for you and pay them $14 an hour — which is really more like $16 or $18 an hour given the current labor shortage,” he said. “That gets passed on to the consumer.”

A consumer who increasingly wants to refuel himself – and not just to save money. Also for speed and comfort.

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“There are a lot more people than people realize who would say, ‘Forget the savings, I just don’t want to wait for someone to come pump my gas,'” Blomgren said.

Blomgren noted that the wholesale cost of gas is now lower than the day Russia invaded Ukraine.

That’s good for New Jersey. But will we ever see the price drop below $3? That’s a different story.

“I think in the future it will be possible with some isolated stations, which are always the cheapest ones – the ones that don’t make a lot of money but are trying to get volume,” he said.

“But if you’re talking about the median price, which is currently $3.50 to $3.60, I’d be surprised if we could get below $3 in the next few months — and the next few months are usually those.” best season for gas.”

Blomgren commented on a number of gas-related issues. Here’s a sample:

ROI NJ: Let’s talk about the price of gas and all the factors that go into it. What does the average consumer not realize?

Eric Blomberg: It’s one of the most competitive industries out there because everyone sells pretty much the same product. It’s the only deal that’s still a penny. It’s the only industry where you have a giant sign at the front of your property that says exactly what your price is. Nobody stands behind the supermarket and says, ‘I can save 2 cents on milk if I drive across town.’

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People don’t fully understand how the market works. Just because they have a big sign that says “Exxon” or “Lukoil” doesn’t mean those stations are a direct outpost of that company. These are mostly small businesses that only have some kind of franchise agreement. They’re just on the front lines.

There’s something about gasoline that really gets people going. No one likes paying more for gas, especially when it seems to go up $1 a gallon out of nowhere. Sometimes people take their frustration out on their neighborhood stations, but there’s nothing they can do. You really are in the same boat as the customer. The price is what it is.

Yield: Then guide us through this. Obviously, the price has been volatile over the past six months. The general feeling is that the price is rising fast – apparently increasing 10 cents a day for a point – but slowly falling. Is that just a feeling or is it true?

EB: It’s probably a mix of both. It’s definitely a feeling because people care a lot more about spikes – then everyone follows the price more closely and keeps track of every little change. Here’s the thing, because people are so price conscious and retailers know this, the price isn’t going up as fast as people think. Retailers will eat it, but eventually they won’t be able to do that anymore.

Because they took it on the chin so much in the beginning, when it comes down their margins tend to be a bit higher than when they started, so it all evens out in the end.

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Yield: But don’t stations make a lot more money when the price is higher?

EB: no Because if you have high prices for a long time, demand will be affected. Now you’re selling fewer gallons but still paying the same property taxes, environmental insurance and other things. So if you get fewer gallons to make that money back, your margin will be slightly higher.

The other thing about stations that people don’t really talk about is the credit card fees. About 85% to 90% of customers make purchases with a credit card. So if gas costs go from $2.50 a gallon to $5 a gallon, the credit card charge literally doubles for the same single gallon of gas. These are costs that must be passed on. It is the largest expense after labor costs.

Station owners love low prices. People drive more. people are happier. And they’re less concerned about that tiny price change.

Yield: Last question, we’ll accept that we won’t get $3 a gallon prices, but is there anything out there that you think could lead to huge volatility again?

EB: This isn’t the first time in recent years that you’ve seen sharp price increases. In 2008 there was a big surge just before the economy collapsed. From time to time the prices go up and everyone gets upset, but then they go down and the pressure is off. It just is.

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