The Reason Gas Prices Are Set the Way They Are

Gas prices over the past few months have mostly been on the rise.  St. Cloud State Economist and Dean, School of Public Affairs, King Banaian says gas stations buy their gas from a distributor who charges them a certain price.  Banaian says each station can only charge a certain amount over the amount they paid the distributor per gallon.  Because of this he says if prices vary from St. Cloud to Royalton to Big Lake it is likely a function of the price charged by the distributor.

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Banaian expects gas prices to drop only slightly this month with a more significant drop expected in January when demand is likely to take place.  He says demand for gas increased this summer and the amount of supply hasn't kept up which has led to an increase in gas prices.

I asked Banaian if the decision to open up more oil reserves by the Federal Government has an impact on gas prices.  He says that hasn't been very impactful.  Banaian says Strategic Petroleum Reserves are somewhere around 700 Million barrels and it's meant to be there for a national emergency.  He says the Federal Government adding 50 Million barrels covers only 2 days demand nationally.  Banaian says it was a symbolic decision made by the Federal Government to acknowledge the gas price situation.  He says the Federal Government could make more of an impact on available oil by encouraging additional pumping by distributors but they haven't been willing to do that.