High Oil Prices Are Killing Gas Stations

It turns out that gas stations don’t actually make much money selling gasoline, since it’s an undifferentiated commodity sold in a competitive market. Instead, the gasoline gets you into the station and then they make a profit selling relatively high markup convenience store items. This gets to a be a problem when oil prices rise. On the one hand, the efficiency-minded respond to more expensive oil by driving less and thus going to gas stations less. On the other hand, precisely because the sale of gasoline and Combos is bundled together as a single shopping experience consumers are disproportionately likely to offset increased gas expenses by buying fewer bags of Combos.