Analysis of Ownership Models and Price Fluctuations in Retail Gasoline Industry


  • Charles A. Izuakor Los Angels Unified School District
  • Mohamad A. Saouli DeVry University
  • Bhaskar Raj Sinha National University


ANOVA, company operated station, dealer operated station, dealer tank wagon, gasoline island, jobber, lessee dealer, oil price information services, rack price, reformulated gasoline, secondary data, vertical integration


There are two broad categories of ownership models in retail gasoline industry: the branded and the unbranded models. In the branded model an employee of the refinery operates the station and receives wages while the refiner such as Exxon, Mobile, or Shell is the proprietor of the station. Another is the leased lease option. In both cases, the station is bound in contract with the refiner for the supply of gasoline. In the unbranded model, the dealers, also referred to as independent dealers or simply independent retailers, are independent stations and are not tied into a contract with any refiner. Such independent gasoline stations as Gas City, USA Gas, Conoco, and even Costco may purchase gasoline anywhere and resell. With different models and ownership arrangements in retail gasoline industry, the big question is what factors prospective gas station investors and proprietors consider when deciding on an ownership model. Gasoline prices at the pump fluctuates seasonally, daily, and often by the hour. Many empirical studies show that such price fluctuations may inversely impact family budgets, gasoline station owners’ bottom line, and high gasoline-dependent companies’ operating margins. Studies have examined the effects of some factors such as crude oil prices and sudden disruptions at refineries and delivery channels. This study adopts an analysis of time series to evaluate the dealer cost factors for branded and unbranded gasoline stations and their impact, if any, on price fluctuations and the choice of ownership models. An analysis of results from the study shows there is no significant difference between the branded and unbranded 5-year average dealer cost of gasoline in Southern California given all the cost factors.  This study found that dealer and consumer cost changes (fluctuations) vary according to gasoline station’s ownership models in branded or unbranded dealerships. Overall, branded gasoline stations were found to be more cost effective operating models in Southern California retail gasoline market.

Author Biographies

Charles A. Izuakor, Los Angels Unified School District

Los Angels Unified School District

Mohamad A. Saouli, DeVry University

DeVry University

Bhaskar Raj Sinha, National University


Department of Computer Science, Information and Media Systems

School of Engineering and Computing

National University


Federal Trade Commission (2005) Gasoline Price Changes: The Dynamic of Supply, Demand, and Competition: A Federal Trade Commission Report. Retrieved from

Johnson, M. A., & Lamdin, D. J. (2012). Changes in gasoline prices and consumer sentiment. The Journal of Applied Business and Economics, 13(4), 43-51. Retrieved from ProQuest.

McCaffrey, D., Liptrot, T., & Jenkins, B. (2011). Retail gasoline pricing: A Bayesian Hierarchical Approach to Modeling the effect of Brand on Elasticity. Journal of Revenue and Pricing Management, 10(6), 514-527. doi:

American Trucking Association (ATA, 2011) Why America needs you. Retrieved from

O’Reilly, P. (2013). Trucking perspective 2013. Retrieved from

Berry, D. C., Byers, D. M., & Oates, D. J. (2007). Open price agreements: Good faith pricing in the franchise relationship. Franchise Law Journal, 27(1), 45-56. Retrieved from ProQuest.

Borenstein, S., & Shepard, A. (2002). Sticky prices, inventories, and market power in wholesale gasoline markets. The Rand Journal of Economics, 33(1), 116-139. Retrieved from ProQuest.

Cooper, T. E., & Jones, J. T. (2007). Asymmetric competition on commuter routes: The case of gasoline pricing. Southern Economic Journal, 74(2), 483. Retrieved from ProQuest.

Borenstein, S., Bushnell, J., & Lewis, M. (2004). Market power in California’s gasoline market. UC Berkeley: Center for the Study of Energy Markets. Retrieved from

Gicheva, D., Hastings, J., & Villas-Boas, S. (2010). Investigating income effects in scanner data: Do gasoline prices affect grocery purchases? The American Economic Review, 100(2), 480-484. doi:

Thompson, J. R. (2008). Misunderstood markets: The case of California gasoline (Order No. 3317977). Available from ProQuest Dissertations & Theses Full Text. (304699312). Retrieved from

The State of California Department of Justice. (2014). California gasoline market. Retrieved from

Environmental Protection Agency (2014) Reformulated gasoline. Retrieved from

Varian, H. R. (2004) Parsing California Gas Prices. New York Times: Economic Scene. Retrieved from

Zhu, X., & Liu, X. (2011). Dynamics of retail pricing: A case study of fluid milk. China Agricultural Economic Review, 3(2), 171-190. doi:

Acharya, R. N., Kagan, A., & Manfredo, M. R. (2009). Impact of rising fuel cost on perishable product procurement. Journal of Business Logistics, 30(1), 223-X. Retrieved from ProQuest.

LeClair, M. S. (2006). Achieving gasoline price stability in the U.S.: A modest proposal. The Energy Journal, 27(2), 41-54. Retrieved from ProQuest.

Abelkop, A. D. K. (2009). Why the government should drink your milkshake: The case for restructuring the federal gas tax. Journal of Corporation Law, 35(2), 393-424. Retrieved from ProQuest.

Shepard, A. (1993) Contractual Form, Retail Price, and Asset Characteristics in Gasoline Retailing (1993). Retrieved from;jsessionid=F37AF3A467A39A748F0C248548C64EA8?cid=1520664

Taylor, B. A. (2000). Retail characteristics and ownership structure. Small Business Economics, 14(2), 157-164. Retrieved from ProQuest.

Hastings, J. (2004). Vertical relationships and competition in retail gasoline markets: Empirical evidence from contract changes in Southern California. American Economic Review, 94(1), 317-328.

Hastings, J., &Gilbert, R. (2005). Vertical integration in gasoline supply: An empirical test of raising rivals’ costs. Journal of Industrial Economics, 53(4), 437-571.

Brewer, J. (2007). Competition in the retail gasoline industry (Doctoral dissertation). Retrieved from ProQuest Dissertations and Theses.

Folger, J. (2011) How Gas Prices Affect The Economy. Retrieved from Investopedia, at

Johnson, R. N. (2002). Search costs, lags and prices at the pump. Review of Industrial Organization, 20(1), 33-50. Retrieved from ProQuest.

Deck, C. A., & Wilson, B. J. (2004). Economics at the pump. Regulation, Cato Review of Business and Government, Retrieved from

Jaureguiberry, F. (2010). An analysis of strategic price setting in retail gasoline markets (Doctoral dissertation). Retrieved from ProQuest Dissertations and Theses.

Cooper, D. R., & Schindler, P. S. (2008). Business Research Methods. New York, NY: McGraw-Hill Irwin.

Oil Price Information Service (OPIS). (2014). Retrieved from

Oil Price Information Service (OPIS). (2014). Crude wholesale and retail prices, 1/2/12 to 12/31/12. Retrieved from

U.S. Energy Information Administration (EIA). (2010). Annual energy review 2009. Retrieved from

U.S. Energy Information Administration (EIA). (2014). Independent Statistics and Analysis: U.S. Energy Information Administration. Retrieved from

Manta. (2013). California gasoline service stations: Browse cities. Retrieved from

Australian Bureau of Statistics. (2005). Time series analysis: The basics. Retrieved from

Snow, N. (2011). Oil prices still primary driver for gasoline prices, FTC says. Oil and Gas Journal. Retrieved from ProQuest.

Beck, T. (2000). Retail characteristics and ownership structure (Doctoral dissertation). Retrieved from ProQuest Dissertations and Theses.




How to Cite

Izuakor, C. A., Saouli, M. A., & Sinha, B. R. (2015). Analysis of Ownership Models and Price Fluctuations in Retail Gasoline Industry. Asian Journal of Business and Management, 3(6). Retrieved from