How gas stations set fuel prices
Gas stations set fuel prices by adding a margin to what a gallon costs them. That cost is the rack price at the terminal, plus freight, taxes and card fees. What you add on top is your fuel margin, in cents per gallon.
In short
- Card fees are a real cost per gallon, so always price off a cost that includes them.
- A price cut only pays if extra fills and inside sales cover the margin you give up.
- Move up with the rack and down with the survey.
What goes into your cost per gallon
Rack price is the wholesale price at the terminal on the day of the load. You do not control it. Freight and taxes are the same for the station across the road.
Card fees are the part most owners leave out. Most fuel is bought on a card, and the fee lands on a big ticket. Leave it out and your margin is thinner than you think.
Example cost per gallon
- Rack$2.609
- Freight$0.040
- Taxes$0.570
- Card fee$0.080
- Margin$0.200
Fuel margin or volume: which makes more money
Every price at the pump is the same trade. Price up and you make more per gallon but sell fewer. Price down and you sell more gallons at less each.
Inside sales change the math. A fuel customer who walks in buys a drink or a snack at a much better margin. A station with a weak inside offer cannot afford a price war.
Gallons sold
$3.459
14¢ margin
$3.499
18¢ margin
$3.549
23¢ margin
Gross fuel margin
$3.459
4,100 gal
$3.499
3,600 gal
$3.549
2,900 gal
Why gas stations post different cash and credit prices
A card fee is a real cost on a card sale and nothing on a cash one. A spread passes that cost to the sale that creates it. It also gives you a lower number to advertise.
How wide it should be depends on your corner. The cost is work, because two prices per grade must match on the sign, the dispensers and the POS.
- Regular3.4993.599
- Midgrade3.7993.899
- Premium4.0994.199
- Diesel3.9994.099
A 10¢ spread is roughly the card fee on a $3.50 gallon.
How to survey competitor fuel prices
Three signs seen on the drive in is a snapshot, not a record. A few weeks of competitor prices beside your own shows who moves first. Neo Office keeps a Fuel Survey next to your posted Cash and Credit prices.
Use it to decide when to move. Prices rise fast and fall slowly, so follow increases on the rack and decreases on the survey. Do not chase one outlier.
Make a survey worth keeping
Pick the stations that matter
The three or four a driver passes before yours.
Record at the same time each day
Being consistent beats being frequent.
Log Cash and Credit by grade
A competitor's cash price is not their credit price.
Read it weekly
Look for who moves first and how long the rest wait.