Why the most common gas price is far from average | Mint - Mint

Just two days earlier, AAA had pegged the national average price for regular gasoline at $3.79 a gallon—a full 50 cents higher.

It’s a gap so large that one might wonder if the number might be wrong or taken out of context. It isn’t, provided you take it literally: It isn’t the average. It’s the actual price on display at more gas stations in the country than any other price.

The statistic comes from GasBuddy, a gas-price app that has emerged as a popular commentator and data provider on gas-price trends. With the price of gas a key issue in the midterm elections, it’s worth exploring how the price can differ depending on whether you specify the average, the median (half of stations charge more, half charge less) or the mode—the most common, which the Biden administration cites.

“Neither one is right or wrong," said Patrick De Haan, the head of petroleum analysis at GasBuddy, referring to the different measures of typical gas prices. “There’s just other angles to the story" that the average, median and mode represent, he added.

For the Biden administration, the appeal of the most common price might simply be that it happens to be lower than the national average. In August, a Politico newsletter quipped that Mr. De Haan had become “Biden’s gas buddy" because of the administration’s penchant for sharing his tweets once gas prices started to drop.

GasBuddy’s data is from its app, which displays a map to find the best local gas prices, and prompts users to update prices as they change. GasBuddy also collects data from gas stations that sign up for its Business Pages, which allows them to enter their pricing directly, and from users of its gas card, ultimately pulling in data for most of the more-than-100,000 stations in the U.S.

(In 2021, GasBuddy briefly became the No. 1 app on the entire U.S. App Store after a cyberattack on the Colonial Pipeline sparked panic buying of gasoline and led to many gas stations running out of gas entirely. Remember that? I’d forgotten about it during the pandemic time warp.)

GasBuddy computes an average that doesn’t differ much from AAA’s. The automobile association gathers its data via a partnership with the Oil Price Information Service, an energy-data and analytics provider that is part of News Corp’s Dow Jones, publisher of The Wall Street Journal.

On Oct. 3, GasBuddy pegged the average at $3.78 while AAA said $3.79. Not an interesting difference. More interesting was the median reported by GasBuddy, at $3.49, and the mode, at $3.29.

The mode is actually more common than random chance might predict. It’s often available simultaneously at tens of thousands of gas stations across many regions, Mr. De Haan said. That’s because prices tend to cluster around key psychological points. For six consecutive weeks in March and April, for example, the most common price was $3.99 as many stations attempted to hold the line against $4.

The average, by contrast, isn’t encountered very often because it’s skewed by ultrahigh prices in one state: California. This fall, while many drivers were seeing gas in the low $3s, prices in California soared from $5.21 on Sept. 6 to $6.31 a gallon by Oct. 10, a jump attributable to refinery shutdowns.

“When there are issues in California with refineries that push prices up, that can skew the national average," Mr. De Haan said. Because the median and mode are unaffected by California’s unusually high prices, they are “a little more relevant," he said.

California’s high prices are partly because of higher taxes, an underground-storage-tank fee, a carbon offset and cleaner-burning requirements. But those factors only add about 85 cents a gallon, according to calculations from Severin Borenstein, an economics professor at the University of California, Berkeley. Gasoline in California costs $2 more per gallon than elsewhere.

“This latest spike, which didn’t correspond to an increase in the rest of the country, really points out that something is very different in California," said Mr. Borenstein, who called this unexplained difference a “mystery gas surcharge."

It’s a relatively recent phenomenon. Before 2015, the gap between gas prices in California and the rest of the country could be explained by environmental regulations and taxes.

In February 2015, an explosion at a refinery in Torrance, Calif., caused prices in the state to surge higher, but they never returned to normal.

The upshot is that the national average gas price is increasingly skewed by California. By itself, California raises the average nearly 20 cents. Mr. Borenstein calculates the latest national average excluding California was $3.53, only a few pennies from GasBuddy’s new estimate of the mode: $3.49 as of Oct. 24.

But averages matter. Californians are still Americans. When it comes to the economic toll from gas prices and inflation, the prices in California matter hugely: California has tossup races in November’s midterm elections, too.

In its figures released Monday, GasBuddy puts the most common price at $3.49. If that number rings true, it probably says something about where you live. The most common price is currently something you can find in much of the Northeast and mid-Atlantic, across the Great Plains and in the northern parts of the South.

And remember, said Mr. Borenstein, “most people don’t see any of this" discussion of gas-price statistics. “They just feel it when the price changes at their station or neighborhood."

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