Commentary: Breaking down gas prices at the pump

by Cathy Melton, Indiana Capital Chronicle
June 1, 2026

Cathy Melton is executive director of the Indiana Food and Fuel Association. The trade association represents independent small businesses operating in Indiana’s petroleum, convenience, and food retail industry.

Given the recent increase in gas prices, along with the announcement by our Attorney General that more than 30 retail locations are being investigated for price gouging, we felt obligated to provide information on the components that go into the price of fuel that you see at the pump.

You would be hard pressed to find a more competitive industry than fuel retailing. No other industry advertises the price of their main product on three-foot signs for all customers and competitors to see. And if that isn’t transparent enough, customers can download Gas Buddy or similar apps to find the lowest prices in their area. This free-market competition protects against price gouging by driving down costs as much as possible for the Hoosier consumer.

This transparency also makes your local convenience store an easy target when prices increase. If all pump prices in an area are the same, consumers will allege collusion. However, if some stores are slightly higher than others, you’ll get officials claiming price gouging.

Fuel price portal shows cheapest gas; aids price gouging investigations

But as prices increase, it’s likely that your local convenience store is selling fuel as a loss-leader, meaning they may be selling the fuel for less than they purchased it for from the wholesaler. When there’s so much competition in an area, no store wants to be the first to raise their prices. Instead, they price the fuel competitively so that you will be enticed to stop at their location and will hopefully go inside the store and buy other products that have a higher profit margin. It’s only when those wholesale costs increase so dramatically that the retailer is forced to raise prices to cover their costs.

In reality, retailers actually have very limited control over pump prices. According to the U.S. Energy Information Administration, approximately 90% to 95% of the retail price of motor fuel is determined before it reaches your local gas station.

The primary factors, largely outside the control of retailers, include the cost of crude oil, refining and distribution costs, and state and federal taxes. The price of crude alone makes up more than half of the final cost you see reflected at the pump. With the price of crude increasing more than 50% since the unrest in the Middle East began, it’s no surprise that the pump price has increased as well.

Without question, the suspension of the state’s gasoline use tax and excise tax have helped to drive down costs for Hoosiers, but those taxes are just one of many factors that influence the ultimate pump price. Unfortunately, those other factors — such as the war in the Middle East and disruptions at local refineries — have caused the upstream costs to outweigh the relief provided by the tax suspensions.

We have had extensive dialogue with the Attorney General’s staff and have provided them with considerable information to demonstrate why gas prices have increased over the last few months. We will continue to work with the Attorney General’s office on behalf of our members as this process moves forward, but our hope is that these investigations can be conducted in a cost-effective manner.

Most of the convenience stores in the state are locally owned and operated. They have few administrative staff available to respond to these allegations, so our hope is that we can work to answer the questions being posed at a minimal cost to these small, Indiana businesses. Forcing these companies to incur significant costs will ultimately harm the Hoosier consumer, as any costs incurred will have to be passed on to the customer in the form of higher prices — a result that hurts everyone.

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Indiana Capital Chronicle is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Indiana Capital Chronicle maintains editorial independence. Contact Editor Niki Kelly for questions: info@indianacapitalchronicle.com.