The Big Gouge

Today’s article is a bit of a tribute to one of my favorite movies: The Big Short.

If you’ve seen it, you know the plot: a handful of people figured out that the system was being distorted, mispriced, and, in some cases, outright manipulated — right before the financial world face-planted in 2007–2008.

Now, to be clear, I’m not suggesting we are staring at a sequel involving mortgage-backed securities, synthetic CDOs, and Steve Carell yelling at a Bloomberg terminal.

But I am asking a fair question:

Are we watching a different kind of market distortion in real time — this time at the gas pump?

Because what I saw driving to work yesterday looked less like normal price discovery and more like a live-action economics experiment sponsored by confusion, convenience, and corporate nerve.

Along my route, gas prices ranged from $3.59 to $3.89 per gallon — a 30-cent spread within just a few miles. And these weren’t obscure one-off stations in the middle of nowhere. Several of the “big boys” — major, recognizable operators — were pricing materially differently despite being located only minutes apart.

That raises an obvious question:

How can stations drawing from broadly similar regional supply chains suddenly have wildly different prices for the exact same commodity?

Just a few weeks ago, most stations were priced within a couple cents of one another. In normal market conditions, location, traffic flow, or whether you felt like making a left turn across four lanes of traffic mattered more than the actual posted price. The difference was usually trivial.

Now? Pick the wrong station and you might be donating an extra $5 to $7 per fill-up for the privilege of not crossing the street.

That’s not “market efficiency.”
That’s The Price Is Wrong, Bob.

Let’s talk numbers.

Over the past several weeks, crude oil prices have risen roughly 33%. That is meaningful. Crude matters. It is the foundational input in gasoline pricing, and any meaningful increase in crude should absolutely translate into some increase at the pump.

But here’s the issue:

In many markets, retail gasoline prices appear to have risen by 50% or more.

That gap matters.

Because while gasoline prices are influenced by more than just crude oil — including refining margins, transportation costs, seasonal blend transitions, wholesale rack pricing, local competition, taxes, and short-term inventory replacement costs — those factors do not automatically justify highly inconsistent retail pricing within the same local trade area.

In other words:

• Yes, oil is up
• Yes, summer blends cost more
• Yes, geopolitical risk premiums matter
• But no, that does not fully explain why two stations a few miles apart can suddenly look like they’re operating on different planets

When price dispersion widens dramatically in a market that is normally tightly clustered, economists pay attention.

Why?

Because abnormal price dispersion can signal one of three things:

1. Lagged inventory pricing and uneven replenishment timing
   (Some stations bought cheaper inventory earlier, others are replacing at higher wholesale costs.)
2. Localized competitive opportunism
   (A station raises prices because nearby traffic patterns, brand loyalty, or convenience reduce consumer sensitivity.)
3. Good old-fashioned margin expansion because consumers have limited alternatives
   (Translation: “Where else are you going to go, walk?”)

And if we’re being honest, it’s probably a cocktail of all three — with a generous pour of the third.

This is not just about whether your fill-up costs more.

Gasoline is one of the most visible prices in the entire economy. Consumers don’t track the Producer Price Index on their lunch break. They track the giant glowing sign on the corner that just went up another 12 cents overnight.

That matters because gasoline prices shape:

• Consumer inflation expectations
• Household discretionary spending
• Sentiment around affordability
• Transportation and logistics costs
• And yes — indirectly — mortgage rates

When consumers and markets believe energy prices are becoming embedded, bond investors get nervous. Nervous bond investors demand higher yields. Higher yields push the 10-year Treasury higher. And when the 10-year Treasury moves higher, mortgage pricing tends to follow.

So while some people see a gas station sign and think, “That’s annoying,”
I see a gas station sign and think, “There goes the 30-year fixed.”

That’s what makes this more than a convenience-store gripe.

It is a macro signal.

A few weeks ago, most drivers pulled into whichever station was easiest:

• Right side of the road?
• No line at the pump?
• Maybe I need a coffee?
• Maybe I need a Monster Energy and a bad life decision?

That was the calculation.

Because when every station is within 2–3 cents of each other, the actual gas price barely matters.

But today?

That casual decision can cost real money.

A 30- to 50-cent spread on a 20-gallon fill-up means you can be paying $6 to $10 more simply because you didn’t comparison shop like you were bidding on airline tickets.

And that’s absurd.

We’ve reached a point where choosing the wrong gas station can cost more than the snack run inside the store.

I’ve said for years that gas stations and convenience stores have a habit of “finding religion” on pricing right before:

• Holidays
• Spring Break
• Summer travel
• Long weekends
• Or basically any moment the American public might have somewhere to be

Historically, maybe that meant 10 to 15 cents more per gallon. Annoying? Yes. Catastrophic? No.

But what we are seeing now feels different.

When:

• crude rises ~33%,
• pump prices jump 50%+ in some areas, and
• nearby stations suddenly post materially different prices for the same product,

…it is entirely reasonable to ask whether normal market mechanics have crossed over into opportunistic gouging behavior.

I want every business owner to make money.
I want convenience stores to be profitable.
I want them to sell all the gas, beef jerky, lottery tickets, and 47-ounce energy drinks their hearts desire.

But there is a difference between earning a margin and taking a hostage.

And when an industry that is normally priced within pennies suddenly starts acting like airline baggage fees with a fuel nozzle, lawmakers and regulators should at least take a look.

Because this isn’t just inflation.
This isn’t just oil.
And this sure isn’t just “the market being the market.”

Bottom line:

What is happening in the convenience store/gas pump world right now looks wrong, feels wrong, and deserves scrutiny. If this is simply supply chain pass-through, then show the math. But if it’s margin expansion disguised as geopolitical panic, then call it what it is:

The Big Gouge.