Gas prices fluctuate due to price cycling



Indiana’s dramatic shifts in gas prices are due to a business practice known as price cycling, according to two petroleum analysts.

The tactic, also known as the Edgeworth price cycle, occurs when retail gas stations rapidly cut the price of gas per gallon in order to undercut competitors. The dramatic drop in price is then followed by a dramatic price increase.

Senior Petroleum Analyst Patrick DeHaan, of gasbuddy.com , said the price cycles occur every one to two weeks. Retail gas prices are tracked nationwide by gasbuddy.com .

“It’s because of a very viscous behavior that we call price cycling that Indiana can be above and below the national average,” DeHaan said. “It really just depends on what snapshot you’re looking.”

According to statistics from gasbuddy.com , the average price for a gallon of gas in Indiana was $3.46 Sept. 4. Two days later, the price per gallon increased to $3.58, only to decrease to $3.40 Sept. 16.

Meanwhile, the national average price of a gallon of gas remained steady, dropping about six cents in 12 days.

According to Gregg Laskoski , also a senior petroleum analyst with gasbuddy.com , prices can increase as much as $0.10 to $0.15 a gallon in one night in the Great Lakes region.

“There’s no question that the Great Lakes region has the greatest swings in prices,” Laskoski said. “You have the most volatility. You have the highest peaks and lowest valleys in relation to other states.”

Laskoski said large gas retailers can even take losses when they drop gas prices really low because they make up the lost revenue by drawing customers to their convenience stores.

“Much of the time what they’re trying to do is drive the traffic into their store,” Laskoski said. “They could even be taking a loss on the gasoline if they can gain greater profit margins on the merchandise they sell inside the stores.”

Given that many consumer goods travel on trucks fueled by gasoline, unstable gas prices can have a significant financial effect on consumers, even those who do not drive.

“There’s no question that gas prices are a very significant benchmark for the U.S. economy,” Laskoski said.

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