Why the discrepancy of gas prices in Will County neighborhoods?

Joyce Nahorski of Joliet wants to know why gas prices are higher on Joliet’s East Side – sometimes as much as 50 cents, she said.

Robert Hernandez of Joliet wonders, too. Hernandez travels all over Joliet for his live feeds on Facebook. Hernandez said East Side gas prices are “way overpriced” and “it’s been a problem for years.”

Hernandez said two gas stations on South Chicago Street near Interstate 80 that face each other always are overpriced. He said people blame shoplifting for the cost. He thinks it’s because the gas stations are close to the highway.

“I just wonder why people don’t drive five minutes over the river to get it at the PS gas station,” Hernandez said.

However, Hernandez said he’s also seen high gas prices at places on the West Side, too: near Louis Joliet Mall, on Glenwood Avenue and on Jefferson Street.

“They try to stay competitive on the Jefferson Street corridor; you can see the price difference,” Hernandez said. “Sometimes Speedway is the higher one; sometimes it’s the lower one.”

Dee Bode of Joliet saw even wider differences last weekend when she took a family trip to Tennessee. Bode said gas prices ranged from $3.36 to $3.80 in Southern Illinois, Tennessee and Kentucky.

“It’s really sad,” Bode said. “Most of Illinois is getting ripped off with these prices.”

Why the discrepancies? The answer is multifaceted.

‘Once one moves, they all have to move’

Wei Chen, associate dean and professor of economics at Lewis University’s College of Business in Romeoville, gave four reasons for varying gas prices: competition, tax rates, operating costs and even the gas itself.

“Different brands of gasoline contain different chemicals/additives that affect gasoline quality,” Chen said in an email. “Better gasoline quality improves vehicle performance. Using economics terminology, we say different brands of gasoline are not ‘perfect’ substitutes.” As an aside he added, “Think about organic chicken versus conventional chicken.”

Chen said overall, higher demand for gas will result in higher prices, the reason why prices are often lower in big cities. But, rent and maintenance costs as well as the volume of gasoline bought and how it’s delivered, all affect the price at the pump, he said.

Oil prices, even the season of the year – because summer gas blends are different from winter blends – all affect gas prices, said Tammy Batson, director of the Center for Economic Education at Northern Illinois University.

Competition also is the reason why prices rarely vary by more than a few cents with gas stations in proximity to each other, she said.

“One of those guys lowers the price and everyone follows suit immediately,” Batson said.

And if they don’t, they soon will, she said. Batson said one can drive from one end of town to the other and watch the market shift as it unfolds. Gas stations aren’t “highly brandable,” she said.

“If they price too high, people just won’t buy from them,” Batson said.

Cost and convenience factor into where to buy gas, she said. A customer might pick one venue over another simply because it’s easier to make a right-hand turn, she said.

So why are gas prices often higher in low-income areas? Fewer people owning cars, scant job market, more crime and more theft, which raises the cost of doing business in an area that sells low volume coupled with the crime, Batson said.

Fewer gas stations in a geographical area drive up gas prices because of reduced competition, she said. Think of Oleson’s store in the old “Little House on the Prairie” TV show – and small towns with a single gas station, she said.

“When there’s only one of them, there’s no competition,” Batson said. “So they have some market power over price … There’s no market power in pricing when there are four of five gas stations within a block.”

Convenience, too, comes at a cost, she said. Gas at stations close to the interstate is typically more expensive than it is “four miles out,” she said.

And even when gas station owners make a profit when prices increase, they lose money as prices decrease when the cost of raw materials goes down, she said. Owners can only drop prices as slowly as the fastest station does it.

“Once one moves, they all have to move,” Batson said.

Despite variances in gas prices, many gas station owners are not making money on the gas itself — the exceptions are gas stations in lower income neighborhoods — but on the other goods each station sells, Batson said.

“It’s all about pops and coffee — that’s where they make money,” Batson said. “Cigarettes and Lottos.”

Jim Kaplan of Joliet, who said he’s watched gas prices for 20 years, said it was “a good time for dealers” in early June. Their costs dropped but they kept pump prices high, he said.

“I guess they were licking their wounds,” Kaplan said.

Today’s national average of $4.05 is 67 cents less than a month ago and 87 cents more than a year ago.

Kaplan said he hopes pump prices keep dropping until they reach $2 a gallon at the end of 2022.

“I’m not predicting that will happen,” Kaplan said. “But it would be nice.”