GRAND RAPIDS, Mich. — Gas stations across Michigan are engaged in a competitive pricing strategy that could save drivers money if they know when to fill up their tanks.
According to GasBuddy Analyst Patrick De Haan, Michigan is the epicenter for price cycling — a pattern where gas stations repeatedly lower prices to compete with each other before suddenly raising them again.
"When one station has a lower price, the other station that maybe across the street or in near proximity also lowers its price," De Haan said.
De Haan says this slower-paced price war follows a predictable pattern. "When, after a week or two, stations have lowered their price so far, generally, they start to get close to either selling at cost or even below cost," De Haan explained.
Once prices drop too low, one station will reset their price higher, and competitors quickly follow suit. Then the cycle of undercutting begins again. "Once prices have gone down 30 to 35 cents a gallon, that's when you kind of are in the danger zone of seeing gas prices make that sudden jump up again," De Haan said.
These price jumps typically occur every one to two weeks and are most common during spring. "That's when we see refinery maintenance," De Haan said. "That's when we see the switch over from winter to summer gasoline."
The Federal Trade Commission has investigated this pricing strategy and found that drivers actually pay less in markets where price cycling occurs.
“If you're able to pay attention to what the pump price is, and time your purchases, you're going to come out ahead of anyone in the country where this doesn't happen,” De Haan said.
Price cycling has occurred for nearly 25 years and presents an opportunity for drivers to save money, if attentive. “Once you see a big jump, start to time it, usually seven to ten days after the big jump happens is usually when another jump will happen,” De Haan said.
As a rule of thumb, De Haan recommends avoiding filling up your tank right after gas prices jump. Instead, wait about a week after a price increase to get the best deal at the pump.
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