Have you ever wondered how street Gas Prices are set, and why they jump around so much without reason? Well interestingly they do not work the same throughout the nation. Ohio and its direct neighbors Indiana, Kentucky and Michigan have extremely price sensitive, competitive, retail gas station environments. This super competitive environment is unique to these states, and causes many anomalies you can’t find anywhere else in the country.

If you look at a graph of average retail gas prices Ohio (Red) you see extreme price hikes followed by slow price decreases for the past 18 months. Ohio, compared to most other states, in this case Pennsylvania and Tennessee show the distinction of the Ohio area from the rest of the country. Where other states street prices seem to be dictated by costs Ohio’s prices seem driven by other forces.

Ohio street prices zig-zag on a fluctuation of profitable and less-profitable swings. This is caused by 3 main things.

First, Consumers have an enormous amount of options and very few barriers between them. With fuel on every other corner, and no natural barriers hindering people from shopping around – choices are endless. Consumer store loyalty is also low and people will drive for miles to save a penny.

Another factor that differentiates the Ohio area markets is competition between superstores (Kroger, Costco etc.) and convenience chains like Speedway. Both fuel retailers seem to care less about selling fuel and more about getting people into their stores at any cost. Although competition exists everywhere, it seems Ohio area fuel stations have taken the brunt of endless price wars since this zig-zag pattern started in mid 2007.

The third reason for this unique pricing zone surrounding Ohio is that, Ohio is also influenced by 3 major fuel spot markets. The Chicago, Gulf Coast and New York Markets all impact the Ohio market. Pricing in Ohio can be found at numerous fuel terminals throughout the state based off of any or all of these 3 markets.

This hyper competitive environment has caused many fuel retailers to lose any control they once had in setting their street prices. Control has become a few mega companies dictating the price. Companies like Speedway of Enon, OH, which has 2760 sites in the Midwest selling fuel. Speedway has also recently bought Hess and its 1256 Stores along the east cost.

Although competition exists nationally, Ohio has another super retailer which impacts the market. Kroger, based out of Cincinnati, OH and the largest grocery-box store fuel chain with 1220 fuel locations throughout the Midwest is an aggressive and high volume fuel retailer heavily rooted in Ohio.

Both Speedway and Kroger use their strength and buying power to stay the low cost station in town. They also use their massive footprint to increase prices once they think the prices have gone low enough. Other retailers have no choice but to follow or they will lose out on fuel profit.