Part 3: Retail Markets RETAIL MARKET Street price for gasoline and diesel. Follows rack pricing, though reaction time is usually two/three days later. The retail portion of the fuel chain is the most visible to the public and likely the most complex to navigate. In the last section, we talked about wholesale racks, where fuel resellers, retailers and end users pick up fuel in “truck and trailer” quantities at one of roughly 400 terminals in the U.S. Aside from some other ancillary shipping-related charges, there’s no tax included in a rack price and, up until this point, we have not considered the cost to get the fuel from the rack to the station. That changes once we get to the retail price level. Who Comes Up with Retail Gasoline Prices? If you ask the average person who sets the price of gasoline at their local station, they might © OPIS by IHS Markit tell you that the station owner slaps the price tag on the pump – while shaking their head at how much their fuel bill eats into their monthly budget. But that’s not really the case. The most common way retail fuel is priced is by tying the gasoline station to a rack. You then take the rack price and add in all federal, state and local taxes PLUS the cost to transport the fuel from the rack to the actual retail site. That final number is a laid-in retail cost. The goal of the retailer couldn’t be simpler: price the fuel above the total laid-in cost. On top of that, most retailers will, indeed, add in their own “margin,” which is what they estimate their own profit to be. That margin is their lifeblood. But, based on what we covered above, most of the price at the pump is not dictated by the station owner. Fuel Buying 101, Part 3: Retail Markets | Oil Price Information Service (OPIS) © 2020, all rights reserved 18