Why does diesel cost vary so widely in Los Angeles?
July 29, 2015 10:46 AM   Subscribe

I'm more curious than anything else at this point. I moved to LA in February and since then I've noted that CA Diesel #2 (that's what they call it out here) is *either* about $2.50-$3.00 a gallon *or* about $4.25-$5.00 a gallon. What gives?

The prices station to station vary slightly from either the low or high number, but there are no stations charging $3.75 or $4.00: just the higher number or the lower one. What gives?? I've asked the owners of the gas stations and they really seem not to know or even be aware of this. And, like I said, it is not temporary... this has been going on for more than six months at least and the gas prices do not reflect this split: they are pretty consistent everywhere. What don't I know (that maybe I need to know)?
posted by n9 to Travel & Transportation (6 answers total) 2 users marked this as a favorite
Is it on-road diesel versus off-road diesel?

Off-road diesel is exactly the same as on-road diesel, except (1) it is not subject to highway taxes, and (2) it's dyed red so that if you're caught using it in a car/truck/on-road vehicle, you'll get in trouble.

Often, off-road diesel costs 20-30c less per gallon, as it's not subject to state or federal taxes. I would imagine state tax in California *might* be about $1.25/gal... ?
posted by tckma at 11:35 AM on July 29, 2015

We used to have the same thing in San Diego, and for any kind of gas, not just diesel. The place I normally went was generally cheap for the area (it was an Arco); the Shell across the street charged $.15 or so more for any kind of gas; there was a place a mile up the hill that would charge $1.50 more; and it was about $.30 cheaper than the Arco in east county out by where my parents lived. The places that were really expensive were typically the only station around in a given general area (like a 1/4 mile or so) and right off the freeway.

Contrast to where I live now, and every station in town has the exact same price for all kinds of gas, no matter what kind of gas it is.
posted by LionIndex at 12:01 PM on July 29, 2015

California sales tax on diesel (and other fuels) are higher than that. Here's a Board of Equalization page on diesel fuel tax, and the linked PDF lists Sales and Use Tax Rates for Diesel fuel at 22.5 cents ($0.225) Prepayment Per Gallon, and a Sales and Use Tax Rate of 9.25%.

I'm seeing more variety than you mention (Gas Buddy link for a Los Angeles, CA search, you may have to select diesel from a drop-down on the right hand bottom corner).

Here's a long article related to this topic: How Do Retailers Get - and Sell - Gasoline? This article from 2008 identifies three categories of gasoline retailers:
  • Major oil owned and operated (less than 5%) - receive product directly from the corporation's refinery assets and their profit or loss is integrated into that of the corporation
  • Branded independent retailer (~52%) - pay a slight surcharge per gallon for using the refiner's brand, benefiting from the supplier's marketing and ensuring a more secure supply of product; wholesale costs are established by their refiner supplier
  • Unbranded independent retailer (~43%) - purchase gasoline off the unbranded wholesale market, which is comprised of gallons not dedicated to fulfill a refiner's contracts -- usually lower cost, but less certainty in availability, so more variation in pricing; wholesale costs are also established by the refiner supplier(s)

posted by filthy light thief at 12:04 PM on July 29, 2015 [1 favorite]

American Indian-owned stations on reservation land don't pay tax in many parts of the country.
posted by flimflam at 1:25 PM on July 29, 2015

I don't think there any native lands in the midst of Los Angeles, and here in New Mexico (where there are 22 recognized tribes), the gas prices aren't that much cheaper on tribal lands, FWIW.

I just found this article on "zone pricing," which also relates to the geographical oddities in fuel pricing.
Oil companies say the practice allows them to adapt to local market conditions by, for example, lowering prices to dealers who face stiff competition from high-volume sellers such as Costco Wholesale Corp.
And here's a short Wikipedia article on geographical pricing (both links via an answer on Stack Exchange).
posted by filthy light thief at 1:59 PM on July 29, 2015

A whole bunch of Los Angeles gas stations lost their minds and raised their prices ~$.40 overnight a couple weeks ago using a pretext of refinery shortages. Looks like it's up like $.60 now. Since their reasoning was questionable, it's possible that your lower price station didn't get the memo and kept their old prices.

But, in general, some stations just decide to go nuts and charge a ridiculously high price for what seems like no reason. The station (I think it's Chevron) just near the 170 South onramp always charges at least 40 cents more than the local rate. There is a 76 in Beverly Hills (Crescent and Santa Monica) that always seems to try to set a record.

The Google Maps picture from June 2015 shows they were charging $4.28, when according to my previous link the avg in LA County in June only got up to about $3.50.
posted by sideshow at 2:48 PM on July 29, 2015

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