Ask MRN: Why is gas in Jacksonville 43 cents cheaper than it is in Quincy?

Dear MRN, 

Why is gas in South Jacksonville 43 cents cheaper (if you pay cash) than gas in Quincy on the same day?

Before we start … the photos at the two gas stations were taken Dec. 5.

The simple answer: Blame it on the Omicron variant.

The best person to explain that answer is Patrick De Haan, head of petroleum analysis at Chicago-based Gas Buddy. He has worked for Gas Buddy for more than 12 years. 

He said in an interview last week the wholesale price of gasoline fell by 30 cents a gallon in one fell swoop between Thanksgiving and the following Monday, but that price has rebounded by about 21 cents a gallon. It’s still about 36 cents a gallon lower than early November.

Uncertainty about Omicron variant leads to swings in wholesale price

“There are massive swings in the wholesale price of gasoline, and some stations are passing along a good portion of the savings, only to then have to raise prices back up again,” De Haan said. “Some stations just aren’t aren’t passing along the savings at all, so stations have an incredible amount of room to play with right now.

“The Phillips 66 (in South Jacksonville) passed along a good portion of the drop in prices, and now they’ve even had to go back up because the wholesale price is going back up.”

At the time of the interview, the price at the South Jacksonville station had risen from $3.14 to $3.19 per gallon.

De Haan said uncertainty about the Omicron variant led to the wholesale price of gasoline plummeting. He said the price has steadily climbed as more information about the Omicron variant is learned.

“Remember early in the pandemic when everyone parked (their cars) for a period of two to four weeks?” De Haan said. “Everyone was on lockdown, and oil demand fell 60 percent. We also had a little bit of a blip during the Delta variant in December (2020).

“It’s because of the unknown. It’s because governments have reacted to new variants by basically restricting travel, which causes demand for oil to plummet. With this new variant, it was completely unknown early on what the variant is or how effective vaccines will be. Oil prices have been pretty lofty recently. One thing to derail that would be a new variant that causes new lockdowns. That’s why oil prices plummeted, because it was unknown. We hearkened back to a time that early in the pandemic, Americans stopped driving.”

Price of gallon of gas also depends on cost when stations buy it

De Haan said the gas stations in Quincy which were selling gasoline at $3.57 a gallon likely were selling for a 15- or 20-cent margin. 

“The station in Jacksonville may have been able to take advantage of that Black Friday discount, because the concern over Omicron (helped) the price of oil plummet 13 percent,” De Haan said. “So the station in Jacksonville basically passed along every penny of the decline, and now that station is starting to go back up. Their margin is basically zero.

“Essentially, it has a little bit to do with competition, but it also is because some stations passed along the massive drop in wholesale prices. Others may have not even had access to it. Stations fill their tank every three to five days. If that station in Quincy had bought the gasoline the Wednesday before Thanksgiving, anticipating a lot of travelers, they probably are sitting on thousands of gallons that they paid for at a far higher price.”

Swings often occur after natural disasters, refinery outages, collapses in economy

De Haan said oil prices are rallying.

“I think Dr. (Anthony) Fauci (director of the National Institute of Allergy and Infectious Diseases and chief medical advisor to the President) has even said that the new variant may be less severe than early anticipation,” he said. “It doesn’t look like oil demand will plummet now.”

De Haan says wild price swings often occur after natural disasters, refinery outages or collapses in the economy.

“It’s rare. It happens,” he said. “If there’s another variant, you could see the same thing happen again, based on how the market reacts to it.”

The cost of gasoline at most stations in Quincy on Sunday was $3.55 per gallon. It was $3.31 at Murphy USA, 5217 Broadway, and $3.10 at Sam’s Club, 700 N. 54th. The cost of gasoline in Jacksonville ranged from $3.15 to $3.39.