Economics, location factors in gas prices

Posted: January 4, 2013

The Winchester Star

These signs on Millwood Pike reflect a recent hike in gas prices. (Photo by Ginger Perry/The Winchester Star)

WINCHESTER — In Front Royal gas prices were as low as $3.12 per gallon Thursday. In Roanoke they were mostly at $3.05 or $3.09. In Charlottesville, drivers could fill up for $2.89 per gallon.

So why were most local gas stations at $3.25 Thursday?

Experts say there are multiple reasons, but chief among them is a simple tenet of capitalism.

“Competition is big,” said Patrick DeHaan, a senior petroleum analyst at the gas price site gasbuddy.com. And it can sometimes lead to a significant difference in price between stations in close proximity to each other.

According to Robert “Bob” Claytor, president of Winchester-based fuel distributor H.N. Funkhouser & Co., Front Royal’s prices are consistently lower than Winchester’s because of pricing wars in the town.

Wilco Hess and Martin’s have been engaged in a battle to have lower prices there, and other stations try to remain close, he said.

Wilco Hess doesn’t have stations in the Winchester area, and similar gas wars have not occurred locally, Claytor added.

Costs can also be affected by proximity to a pipeline terminus and how close that withdrawal point is to Louisiana and Texas — where most of the gasoline sold in Virginia originates.

That explains why prices in southern Virginia are typically lower than in the Winchester area, Claytor said.

Prices on the eastern side of the Blue Ridge in Northern Virginia — mostly $3.35 to $3.55 per gallon — are higher than the Winchester area.

Part of the additional cost there is due to a requirement that stations sell a special blend of gasoline — which is more expensive to produce — that reduces pollution, Claytor said.

A gasoline tax of 2.1 percent on the sale price is levied throughout Northern Virginia to help pay for the region’s Metrobus and Metrorail systems.

Gas prices can also be affected by the higher cost of doing business — such as property taxes and wages — in a more populated area, DeHaan said.

Federal and state gas taxes make up a small portion of the cost across the state.

The federal share is 18.4 cents per gallon and hasn’t been adjusted since 1993. Virginia levies a 17.5 cents per gallon tax, which hasn’t changed since 1987.

— Contact Conor Gallagher at cgallagher@winchesterstar.com