There are a few more dollars walking down Main Avenue in Durango than Main Street in Cortez. So why do Cortez residents typically pay a dime to a quarter more per gallon of gasoline?
Skyler McKinley, director of public affairs for the American Automobile Association Colorado, said the higher population of La Plata County and the number of people driving through a regional center leads to a greater number of gas stations, and this supply-and-demand factor is the main reason Durangoans typically pay less for their gas.
“When you look at a map of gas prices in Colorado, or any state, you see the most populated areas have lower prices, and higher prices are in more rural areas,” he said. “It’s simple supply and demand. Durango is the regional hub, and it has a college. More people are moving through the town, and that typically leads to more supply, and that adds pressure to hold down prices.”
On Thursday, the AAA map of gas prices in Colorado showed gasoline ranged from $2.66 to $2.53 in La Plata County and $2.82 to $2.66 in Montezuma County.
Andrew Friedson, assistant professor of economics at the University of Colorado Denver, said that if Durango has greater demand for gasoline and the supply chain is the same in both towns, Durango should have higher gas prices.
Friedson said he suspected supply differences explain why Durango sees lower gas prices.
Durango has a greater number of stations and a greater number of companies competing in the gasoline market, Friedson said, and that’s likely the biggest single supply factor keeping Durango prices lower.
“If you only have two companies competing in Cortez, it’s going to be easier to keep prices higher,” he said.
Also, Durango’s larger population may allow Durango stations to obtain lower prices per unit by ordering more gas. “It’s like buying your food at 7/11 versus buying at Costco,” he said.
Supply and demand differences between Durango and Cortez, McKinley said, would overcome any other variable that might lead one to think Cortez might be the lower-priced gas market.
For instance, land costs, which are higher in Durango, McKinley said, would be only a small variable in determining the price of a gallon of gasoline.
McKinley said other theories behind Cortez gasoline prices, such as operating losses, might have some effect, but he said it would be minor compared with basic supply and demand issues.
Gasoline is a low-margin product, typically averaging about 15 cents per gallon profit, and McKinley estimated recovery of losses in shoplifting from a gas station’s convenience store might add 1 cent to the cost of gasoline in Cortez.
Last week, gas prices in Durango hit a low of 2.38, but they have gained 20 cents in the past week, which is typical of the bump in prices for the Labor Day weekend, McKinley said.
“Labor Day is the last high-demand weekend of the summer, and you typically don’t see gas increases after the holiday,” he said.
The good news, McKinley said, is he expects the price of gasoline to drop “and drop quickly” after Labor Day.
“The winter blend is cheaper to make, and you’re going to have fewer drivers on the road with the same number of gas stations,” he said.
parmijo @durangoherald.com
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