Odd Lots - This Is What Actually Determines the Price of A Gallon of Gas

Episode Date: August 19, 2022

Gas prices are central to everything these days. Biden's approval rating seems to move inverse with the price of gasoline. The entire market started rallying after gasoline prices started moving lower in June. But then, what exactly determines the price of gasoline? Of course oil is a big part of it, but it's just one significant driver. There is also refining capacity. And taxes. And the gas station's margin. And the cost of distribution within the United States. So how does it all shake out? On this episode we speak with Patrick DeHaan, head of Petroleum Analysis at GasBuddy, who breaks it all down, and helps us understand the market for gasoline.See omnystudio.com/listener for privacy information.

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. And welcome to another episode of the Odd Lots podcast. I'm Joe Wisenthal. Unfortunately, my co-host, Tracy Allaway, is off today. Nonetheless, we're going to hopefully have an important conversation about gasoline. It's been on this pretty big tumble over the last two months. But I still sense that, you know, okay, it's sort of tied to the price of oil. Oil prices have come in. But it feels like there's a lot more to it. than just the oil price. It certainly doesn't move in just lockstep with oil. There's refining. There's regional variations. There's variations from one gas station to another, literally right next door.

So there's, at least to me still, there's still a lot of mystery about like why the price of gas is what it is. Why does it always seem to end in 99 cents? I've never like gotten an answer to that, whether it's $299 or $399 or $4.99 seems to be popular. All these things, you know, gas is so central. It's so central to the economy. Ever since gas started going down, prices started going up. Biden's approval rating started ticking up when gas prices started falling. And of course, vice versa. The price of gas feels like it's determinant of almost everything these days in American life. And so why do we learn, like, what causes the price of gasoline? So to answer all of our questions, or I guess in this case, just all of my questions, I want to bring in Patrick DeHan. He is the head of petroleum analysis at

GasBuddy, which is a service that provides price tracking for consumers, tells them where the different prices are at different stations around them. He's been at GasBuddy for 13 years. He knows everything about the price of gasoline. And if you follow him on Twitter, he is always answering in a pretty direct manner, what's going on with gasoline, and when he's, when price is going up, Republicans love him and talk about how terrible the White House is doing. And when the price is going down, everybody flipped sides. And meanwhile, he keeps it apolitical and just says, this is going on with gasoline, even though it's so, so central to what's going on. So Patrick, thank you so much for coming on, odd lots. Thanks for having me. It's certainly always fun.

you know, when prices go up or down to see the movements and watch all the politicians change sides, right? And one minute it's great and the next it's not. I mean, that is my impression just from watching your Twitter handle. Like you're like talking about the price of gasoline and suddenly you see so viscerally how central gasoline is to say American politics by essentially like who is attacking you at any given moment for just for just tweeting out the news. Yeah, that's really true. People have a problem with prices going up and they have a problem with them and then coming back down. And, you know, one side likes when prices go up or down. It's, you know, it's become very political.

We'll just say it that way. Well, let me ask you a question that is, I don't think political at all. So it's a super basic question. But is it the core of what you do at GasBuddy? And I also think it can maybe help us like almost like work backwards and figuring out the price of gas. But if your app essentially compares, well, what is gas at, uh, this corner station versus maybe what you could get if you drive three blocks away or 10 blocks away, it immediately raised the question like, why is gas the price of gasoline different at one station

to another? Why is there variation within gas stations very close to each other? Well, and it's really loaded and very complex. I'll try to dumb it down. But essentially gasoline, like oil and other commodities, the prices that stations are paying will change on a daily basis. There may be different suppliers. There's different competitors. So essentially, at the station level, stations are all paying something different, depending on the timing of how much they're buying, who they're buying from. And with oil so volatile this year, because of a lot of these high-level factors recovered from COVID, Russia's war in Ukraine, the overall economy. The price of oil and gasoline has been gyrating violently.

So one station may get at 25 cents again less than another. And so that goes into these various hot. spots. But stations also, when prices have been declining as they've been for the last nine weeks, stations have incredible latitude to either lower their prices very quickly as their cost goes down or kind of more slowly, depending on if they got the timing right this year. Stations may have a different financial position. That is, they may be hurting when prices went up, because as many people do not know, it's oftentimes very hard to be the first one to pass along the price increase. So stations take it on the chim when prices go up and when prices,

go down, they're in less of a hurry to lower prices. And that can create some of these hot spots where there may be in a very aggressive gas station that wants to lower prices. And some others may not be so aggressive. And that can cause a lot of variety and what you're paying locally. I don't know if there is an average gasoline station. I'm sorry, these are going to be all very, we might just do 30 minutes of like extremely rudimentary questions about how gasoline works. So I hope that's cool to do. But I don't know if there is an average gas station. And I'm sorry, But to the best you can answer the question, how often do gas stations themselves get a refill? And how close to the bottom of their own tanks do they get typically before a refill?

Like, how do gas stations play that? Well, it depends on the size of the gas station. Some mom and pops may simply order when they need more, whereas the pros, the companies that may own many stations may have somebody that buys fuel and looks at markets to know. when to time it right. It's like an airfare, right? The airfare has changed on a daily basis, and if you want to fly, you're just going to buy airfare, whereas if you're buying a lot of airfare, you may weigh a day or two. So, you know, at the station level, stations are kind of adjusting their prices looking at that. But, you know, it's, again, going back to the volatility, it's been such a crazy year that not every station has that competitive advantage where somebody

can just watch the price that they pay. So bigger stations, that have more stores may have a leg up in terms of having, you know, somebody that may be in a position to simply watch the markets and to be able to time purchases right. But when prices have gone down, it's all very subject to competition, how quickly prices go down. There's, there's just so many things that go into it. But ultimately now we've seen prices go down for nine weeks. And I think the most frequent thing I've been asked in the last nine weeks is why is X town, you know, X cents per gallon lower than mine. And it really has to do with just competition and whether or not there's like a status quo or if there's a wholesale club, if they're aggressive and lowering price, it certainly

varies widely. I was wondering about the competition question. If there's like a town with lots of gas stations and lots of consumer choice, can you sort of empirically show that there is more gas price volatility or maybe more aggressiveness on pricing than say a single gas station? like in the middle of Death Valley, California, that no one else can, you know, it's your only chance to fill up for another 100 miles. Well, it's really fascinating because oftentimes we find that the solo gas stations by themselves are generally the ones that may charge a little bit more, but there are exceptions to the rule.

And it may happen more often than motorists realize that there's an exception. I think there's a couple stations that I watch that are aggressively lowering prices, and they are all by themselves. So I think the majority, like you said, if you're in the, if you're in the middle of, of death valley, you have a captive audience. And prices are more likely to be above average in that situation. But there are some holdouts in the country that I can say this station is so low, but it's also bringing prices down in the majority of stations that surround it miles away. Interesting. And why would that be? Like, is it what would be the reason why a, gas station that doesn't have a lot of competition in its proximity may still be aggressive on pricing.

They may want to pull people in from a further distance away. If you're a couple miles down the road and your station is not in the best geological location to pull traffic in, people that use the gas, but yet may see that you have a low price two miles down the road. And so some of those low prices can lure people at. Economists must always be wanting, they must always be trying to get your data because I could imagine there are a lot of interesting sort of like real world tests that can be seen from it about the degree to which transparency in pricing affects markets themselves because maybe like, okay, these days you're like, oh, I will drive two miles down the road to get

cheaper gasoline because the gas buddy app says I could save 10 cents a gallon or something like that. But at one point in the past, consumers just didn't even have that knowledge. And so perhaps pricing discrepancies or divergences could persist longer. Yeah, you know, there is a lot of market for this data potentially, you know, not only from, you know, entities that want to watch this and better understand it, but stations may, you know, want to look at their own station data and compare it to their competition as well to make sure they have an edge. So, I mean, there's a heavy market for this. I mean, it's information and, you know, gas prices are so prevalently priced. You can't escape them. And so, yeah, I mean, I think there probably is a lot of interest from the consumer level to the

business that wants to be as aggressive as possible. And they want to know that their price is the lowest, right? If anything is true of a lot of stations is they want to compete, they want to have the lowest price and they want to make sure their prices below the competition. What about the question of margins? How much do gas stations make actually selling retail gasoline above wholesale, typically? And then does it change much for gas stations that have significant ancillary businesses? Some gas stations are literally just like a guy in a little, you know, a tiny building and one pump, whereas then you have others with lots of but then there's a food court inside the gas station gifts and other things like that, in which case bringing people in,

maybe you lose money on the gas, but you can make a lot of money on selling drinks and stuff like that. Well, there's a perfect example. You mentioned food court and I want right to it, right? Some of the wholesale clubs that exist, they will take a much thinner margin. That is, they'll make five or 10 cents a gallon instead of 20 cents a gallon or even, you know, maybe 15 cents to get you to the location.

Yeah. Because what better way to get you to their store to buy 50 rolls of toilet paper or a 48-half of your favorite drink than to get you there with a low price. So there is absolutely a difference in agenda. And some stations will have a lower price to get you to their location, whether it's a wholesale club or one of these large format gas stations that are extremely popular. You know, they'll have a whole, you know, slew of different food options. So price is a great way to get people to your location. And then, as you mentioned, to go in the store where margins are higher. But those locations, they'll still make some money.

It may be 5, 10, 15 cents a gallon compared to the competition could be 20 to 30 cents. And now those margins, even at the big outlets, will vary depending on what's going on. You talk about, you know, the Russian invasion of Ukraine and the wholesale price of oil and gasoline varying. There will be times at a year, very brief times, that a station could make an excess of 50 cents a gallon. Now, that's not normal, right? That is extremely abnormal. I would say that over the course of the year, a well-run station will average a margin of between 20 and 30 cents a gallon, which isn't a whole lot. And keep in mind, when prices are higher, they're going to make less margin because those interchange fees, if you're using a credit or debit card, there's a cost to station owners that they don't often or all the time pass along to you. And that fee goes up as the price of gasoline has been higher. Wait, I hadn't even thought about that. So what happens? The higher the nominal price of gasoline, they have to pay a higher check to the credit card companies. Exactly. It's very much like a commission, you know, if you sell a home that's worth a million dollars, your commission, two and a half percent is a heck of a lot more,

selling the million dollar home that is a hundred thousand dollar home. So as the price of gasoline goes up, those interchange fees charged by credit card companies are taking more a bite out of a station's profit. That's really interesting. I hadn't thought about that. So is it true, but it is true sort of empirically that we can see that the gas stations, if they're attached to something that sells more, whether it's a large format gas station, like a Buckees that people want to go into because they have clean bathrooms and food or a Costco or a Walmart, or where maybe they'll sell you like a bunch of rolls of toilet paper as well. Those consistently have lower prices than a sort of small mom and pop or a place that sells nothing but gas. Exactly. Not only do they have the different

agenda, keep their prices down, but they may have pricing power too. I mean, there's definitely an incentive for a refiner that's producing gasoline to make a deal with a big club like a Costco or a Buckees because their volume throughput, they can help that refinery, you know, sell through more of its gasoline. So those bigger stations, those bigger format stations sell more, they can have a lower price because the refinery may be more incentivized to make a better contract offer with them as an outlet to get rid of that fuel. Would these be national contracts that a company like Walmart or Costco or Buckees, which is, I guess, sort of regional, but some sort of contract, like a blanket contract that would affect all of their locations or would it be a series of contracts

with regional refiners? You know, it can be both. It depends on the scope of the refiner. If that refiner has refineries in every region where the SOAR has outlets, it could be in every market. But oftentimes that's not the case. You may not have a shell refiner in the West Coast, but you may have a shell refinery in Texas. So sometimes it may be localized to different regions, depending on what refineries operated in a given region. I'm June Grasso, inviting you to join me for the Bloomberg Law podcast. Every weekday, we help you make sense of the legal stories that shape the nation and the world. Listen for complete analysis of the biggest court cases, the latest actions from Congress and regulators,

and the legal moves driving the markets, from corporate law to constitutional law and from state courts to the Supreme Court. At Bloomberg Law, we go beyond the day's headlines. We speak with top attorneys, judges, scholars, and policy experts to break down what the rulings really mean. We do this every weekday, then bring you the best conversations in our daily podcast. search for Bloomberg Law on YouTube, Apple, Spotify, or anywhere else you listen. On the East Coast, listen as you start your day. And on the West Coast, catch up in the evening. That's the Bloomberg Law podcast with me, June Grosso.

Subscribe today wherever you get your podcast. I want to get to more of the sort of refining question and the degree to which refining adds to the price of gasoline. But before we do, you know, you often tweet, you're like, Oh, the most common, what is the most common price of gasoline right now? We're recording this on August 16th, but what's the most common price of gasoline in America right now? Well, let's take a look here. As I look, we're at 349 is the most common price across the U.S. And they're all ending with the nine. I mean, talk about psychology.

Yeah, yeah. So is that just as obvious as it seems that it's like it looks better to say $3.99 than four or 349 than 350? It's like, it really is. It really is. You know, no, I'd be hard pressed to find any station that ends in a zero because why end in a zero, 350 for example, yeah, sounds a whole lot worse than 349. So everyone's going to take the nine instead of the zero. And you never see a 401. Have you ever seen one? I mean, I've seen a 401. It always has me scratching my head. Like, why don't you stay at 403 and then make the jump to 399? Yeah. You know? That's really funny. So that's all psychology. How much like sort of like broad regional difference is there in America, depending on whether, say, you're in Iowa versus somewhere, you know, in an expensive part of California. I know I'm pretty sure gasoline is very expensive in Hawaii where it has to be, uh, all has to be shipped in. Maybe the, I don't even know the word. How many like price regions are there in the U.S? There's five. And that's defined by an acronym. pad, petroleum administration for defense district. And that goes back to World War II when we

slice the country into five pieces for strategic purposes. And now those regions define, you know, there's different supply and demand aspects in each one of those regions. And to your point, each one of the regions has a different price based on the supply and demand balance in that region. And it's all defined by, you may hear about the NYMEX, the New York Mercantile Exchange. They trade gasoline. And then under that, every region trades at a different basis to what that one overlying market is. And that basis can be minus, meaning a region could have a discount if they're well supplied. And if things are running well, some regions can have a premium or a surcharge based on if supply is extremely tight.

And every region, right now as I look at it, between the highest and lowest, there is about a 50 cent a gallon difference on gasoline. Well, if you include the West Coast, it's even more dramatic, a 75 cent of gallon difference. between the cheapest market, which is the Gulf Coast, and that's because there's a lot of refineries there, and there's a lot of supply, and the West Coast, which is the highest because of the opposite. There's not a lot of refineries. They have special blends of gasoline in California.

So even there, you're going to see a pretty wide gap between the nation's cheapest and most expensive, because even at the basis, the base level, there's a huge gap, a 75-cent gap between the lowest and the highest region. So what is it in the Louisiana pad right now, what is it on the West Coast, like in terms of average prices? Well, you know, not taking into consideration tax or pipeline tariffs, so transportation distribution, the wholesale price in the Gulf Coast today is about $257 a gallon.

Now, if you throw tax and tariffs on, that's where you get a lot of these states, Texas, right now the statewide average $3.42. So you're always going to see a retail price that's quite a bit higher because taxes usually slap on about $0.507 a gallon. But that 257 in the Gulf Coast, in the San Francisco, the northern California market, California is broken to northern and southern. The northern California market, the same price of what fuel they use is 325 a gallon. So 257 in the cheapest community, the Gulf Coast, and 325 in the most expensive market, which is northern California. So the hierarchy of prices in the United States, like you start with this NYMEX price.

the Arbob future? That's exactly it. It's NYMEXRBob is the foundation and everyone will trade at a premium or a discount to that NYMEXRBBB contract. Okay, so here's another question. I am looking right now at the generic first month NYMEXRBB contract, ticker XB1 commodity on the terminal. Now, the price is not quoted in per gallon. It says $290 is the current price. What is that? Like, what is the basic volume unit of that contract, how many gallons are there? Is that 100? Of those contracts, and I'm assuming you're looking at the front month right now, I'm showing on my screen, this September of 2022, looking at the specifications of that contract, you're talking about 42,000 gallons, which is a thousand barrels, is a contract. That's kind of the basic contract. Now, the CME,

which the Chicago Mercantile Exchange, NYME as well, they've done many, contract, so you don't have to bet as much, or buy as much. But that's the base contract is a thousand barrels of gasoline, which is 42,000 gallons. Oh, I see. I'm looking at it. Now I'm looking at the description of the contract. So there's 42,000 gallons. And it looks like one contract value is actually $122,926 for one slug of gasoline. So the hierarchy goes, there's the NYMEX price. Then there's the five pad regions in which there's usually some sort of basis above that, although in theory at times that there's a lot of inventory in region, it can be below. And then that's determined by various pipelines and other costs in proximity to refineries.

And then there are the state taxes. And there's one thing you left out. It's even another complicating factor. Our bob is reformulated gasoline. We call them kind of the bobs. It's a family. RBOB is reformulated. C-Bob is conventional blend stock for oxygen at blending. That's what Bob means. Blend stock for oxygen at blending, meaning that you have to add an oxygen at to us.

Something like ethanol. We used to use MTBE, but something like that. And so you have R-Bob, reformulated, C-Bob, conventional. And out in California, it's California R-Bob. So California Air Resources Board. has its own requirements. So out in California, it's car bob. Car bob.

I assume there's some sort of environmental. Lower emissions, clean and burning. What regulates the bobs is the RVP, the re-vapor pressure, which measures volatility of fuel. How easy that fuel may, or I should say the pressure of emissions from burning a gallon of fuel. So summer gasoline has lower RVP. That means the fuel doesn't give off as much emissions. when it's burned. So it's less volatile. And because temperatures can interact with that,

you know, in the summer months, you see ozone action days, right? Because the airborne temperature, the ambient temperature interacts with those emissions to create more ozone. And so lower RVP is important to clean the air up. And depending on where you are, California has the most stringent requirements for RVP 5.99, whereas some of the bigger cities use 7.0 PSI RVP. and some of the conventional gasoline for summer use is 9.0 pounds or PSI RVP. So the cleaner the gasoline, the lower the RVP. And then when we move into winter, the standards go up to 13.5 and 15 is kind of the default RVP. So 15 PSI in the winter, 9 PSI in the summer.

And the lower the RVP, the more you pay because the cleaner burns the components are cleaner, less volatile, and cost later. So I'm looking right now, again, I like this game of you describing something in gasoline and me trying to find a ticker for it and see if this makes sense. So I'm looking at a chart now on the terminal. It says, LA 85.5 October Carbob prompt, different index. I think it's prompt. And right now it's 19 cents.

So does that mean that, if that sounds right, does that mean that there's a 19 cent premium for the California blend, basically, of gasoline right now? Yeah, that's that, you're looking at the, the, the, the, the basis difference. Yeah. So 9x right now is 290. Yeah. Uh, if you're looking live. And the basis difference for LA is 19 cents. So that would put the car bob price at 309. And that doesn't include tax. So that you're finding the, the basis, that's the differentiator between whether your region is paying a premium or getting a discount to that New York mercantile contract.

Like I said, the West Coast is generally a very tight market. Yeah. So it's rare to see a discount in the summer months in the West Coast, whereas it's rare to see the Gulf Coast ever be at a premium because there's so many refineries down there that the market is generally well supplied. But if there is a major hurricane shutting those Gulf Coast refineries down, you can see a premium for Gulf Coast gasoline. And by the way, all these various foundations, these basis points,

that encourages refineries to send gasoline to these regions where they can. I was just going to ask about that exact question. So to what degree can refineries shift the distribution of gasoline depending on where there's a premium in a given region? Well, they can do that indiscriminately where pipelines exist. Now, the West Coast is essentially cut off from the rest of the country. Pipelines flow east to Las Vegas and West into Phoenix. So there's a little bit of a disconnect. We always call the West Coast a Petro Island because what's produced there stays there and you can't easily bring material into the West Coast. It's probably faster for material to come from Japan or Singapore than it is from the Gulf Coast going down to the Panama Canal, then going up the east, you know, up the California

coast. Why is that? Well, I mean, the time it takes to load a ship in the Gulf Coast, go down through the Panama Canal and keep in mind the expense of sailing through the Panama Canal because It's, you know, it's expensive toll. And that may disadvantage your cost. But otherwise, much of the rest of the country is well connected. Gasoline from the Gulf Coast can run up the colonial pipeline to the East Coast and it ends in London, New Jersey. So right now, the East Coast has been extremely tight. An example, the New York Harbor market is trading at a 14 cent premium to NYMAX, whereas the Gulf Coast is trading at a 34 cent discount.

that setup arbitrage opens the door for refineries in the Gulf Coast to send as much material into New York as they can because they get more money for it. But the space on the colonial pipeline is limited to the capacity. And right now, it would not be surprising given that pretty wide difference that that pipeline is fully allocated, meaning it's out of the room. The colonial pipeline, that was the one that got hacked last year, right? Yes. What happened that? How did the distribution of gas move as a function of that pipeline having been shut down for a few days? Well, it didn't really move.

And that was the problem. Now, there's intermediate storage containers, right? At the big terminals, you see those white tanks above the ground that can hold hundreds of thousands, if not millions of gallons of fuel. I think most of the problem from the colonial was not actually the disruption in the flow of fuel, but how motorists responded in a panicked way to exacerbate the, the disruption of fuel supply. People went out there. I mean, we saw the photos.

People with plastic shopping bags filling up a plastic bag with gasoline. And so motorists overwhelmed even under normal times. When there's not issues, they overwhelm the system. I'm going to throw out a percentage. I think of the outages that people experience because of the colonial, 95% of those outages were probably induced by how motorists responded. And 5% of the outages were probably because of the stoppage of the pipeline. So it becomes down to human beings.

behavior, which exacerbated the situation. But we probably would have made it through there with limited disruptions. But, you know, once the beast was out there in terms of once people thought there was going to be disruption, everyone ran for the problem. Hi, I'm PJ Vote. My podcast search engine has a new two-part series for you. Of all the new technologies coming out of AI, the most transformative one might be driverless cars. They're already on the road in 10 American cities, and they're quickly coming to more. We tell the story of how we got here. The secret team at Google, the spent 15 years building what might be the safest vehicle on the road, and we cover the fights

brewing in blue cities, where unions and politicians are working to keep those cars off the streets. Listen to search engine wherever you get your podcasts. All right, we just have a couple more minutes left. I want to wrap up. But, you know, refining capacity has been a really big macro topic. How much of a spread, the sort of diminishment of refining capacity has caused, you know, on top of the price of crude oil, then it has to be refined into gasoline. Gas, And lots of talk about early shutdown of refineries, especially during 2020 when there was this collapse in gasoline demand. How much do you think that's appreciated?

And in your view, how much has the constraint of refining capacity contributed to, well, really like the huge upward move that we saw beginning that sort of culminated in June? Well, I'd say a lot of it was due to maybe not necessarily, you know, the lack of refining capacity humans trade, right? All of the trades you see the way the market's moving is because humans are behind it, trading, based on the tangible value. And the problem is when you start to run out a capacity, it freaks the market out because obviously if supply or demand exceed supply, you know, prices are going to be on a runaway. And so the market tends to be less measured in its response when you start to see, you know, this, this, this, this, this, this, this, territory where there's just an inability to keep up with the man. The market panics and prices start to escalate out of control because, you know, it's fear-based. So people get out of control and the market goes up, up, up and up. And so having said that, it's really important that we have spare capacity for both oil producers and refining. And by the way, that $150 barrel price in 2008,

part of the reason why that happened is because we ran out of spare capacity. So the market just went out of control, it overheated, which inherently caused Americans and the global economy to stop using as much. And then we finally got our spare capacity back. But this has been a story. And again, it's happening now at the refinery level because of COVID and because the nation has been moving away from EVs. But I think that's a big reason why prices did get so out of control is because of the possibility that supply was not going to keep up with demand. But we're going to need more refinery capacity. The good news is it's coming online here in the next couple years. Oh, that's good. All right. Final question, what is going on with demand levels

right now? Because a lot of people are questioning this EIA data, which shows that somehow demand is below 2020 levels, which makes no sense because at that point, there are still tons of people not going anywhere. What's going on with demand? And what's going on with that data we're getting from the EIA? Well, first of all, it's important to understand the methodology. Right? Don't just look at the number and say, oh, this is, you have to dig into what the number represents. And for the EIA, it's the best number that they can get. They measure, you know, the pipelines, the tanks, the moving of products. So their metric is called implied demand or product supply. Okay. Right. You're basically saying the market's consuming this much because we see this much moving

through these tanks. But it's not the perfect gauge because stations have intermediate storage facilities too that are not measured by the EIA. So stations could be sitting on more or less gasoline depending on the situation, right? Because there's intermediate storage devices that the EIA doesn't measure. So yes, but he actually looks at demand at the retail dispenser. And so our data doesn't line up with EIA because EIA could be flawed in that maybe when prices are plummeting, stations are going to say, we're not going to buy 10,000 gallons today. We're going to buy 2,000 gallons today. And then in three days when prices are lower.

And the EIA's data then would say there's less demand because they don't see stations, right? Stations are slowing down their purchases to get ahead of pricing differences, whereas our data continues to look at fuel dispensed at the retail station. So it's important to understand the EI's methodology. There is inherent flaws. They just look at it differently. Your data does not, your data shows robust demand.

It shows healthy demand, certainly not at record levels. And now we're starting to see demand seasonally decline. Okay. But that's where we are. It's not as weak as what the EI has been suggesting recently. Patrick DeHan, I've been wanting to get 30 minutes of your time for a long time to learn. You know, all these rudimentary, the dumb questions about the price of gasoline, Like, why is it different in one place?

Hey, there's no doubt of questions. And, you know, this is my favorite thing to do. It's just there's not a whole lot of solid answers out there. And there's a lot of curiosity. And that's, you know, that's how I got into this too. Well, really appreciate you coming out on Atlas. My pleasure. Thanks for having it.

Well, that was really fun talking to Patrick. I wish I could banter with Tracy for a few minutes. But I did find that really helpful because, A, I'd always been really curious about things like, well, how much margin is there for a gas station? What are the advantages for a gas station that sells other stuff besides gasoline? What is the pricing power of the large chains of gasoline stations? Why is there such regional variation? So all of these questions Patrick answered very well.

Also, that EIA thing, that's been getting a lot of attention because people are looking at this falling price of gasoline. Like, oh, yeah, it's because the economy is falling off a cliff. People are driving less than they were in 2020. I don't think that's correct. Intuitively, it doesn't seem right. And as Patrick noted, the gas buddy data does not show that kind of collapse at all, although I guess we are past the peak of the summer driving season. So really fun talking to Patrick, and I guess we will leave it there.

This has been another episode of the Odd Lots podcast. I'm Joe Wisenthall. You can follow me on Twitter at The Stallwork. Follow my co-host, Tracy Alloway at Tracy Alloway. Follow Patrick Dahon at GasBuddy Guy. follow our producer Carmen Rodriguez at Carmen Armin and check out all of our podcasts at Bloomberg under the handle at podcasts.

Thanks for listening.