November 2, 2012
Estimating The Number Of Gas Stations In The United States
Earlier this week I posed the first in a weekly series on Thought Questions asking: How many gas stations are in the United States?
There is more than one way to approach this question. The important thing to note is that our approach to estimation revolves around our experiences. But at some point one usually has to make a reasoned guess. In this case, my initial assumption was a guess on the costs to run a gas station.
It turned out that I was pretty close – at least by comparing my final answer to the actual value. But this was mostly luck. Again, the point of this exercise is not necessarily to get exactly the right answer, but to see how one approaches the question. Anyway, without further ado, here is my solution to the problem:
- I figure that in order to pay employees, cover business costs – capital payments, advertising, etc. – and leave some money left over for the owners gas stations need to make about $150,000 per year in net income from gasoline.
- But they only make about 5% on the gross sale of gasoline, so need to bring in about $3 million a year. With an average transaction price of $60 (15 gallons at $4.00 per gallon), each gas station needs to have about 50,000 transactions per year.
- Now suppose that every car is filled up about 40 times per year – about once every 7 – 10 days. This amounts to about 1,250 cars needed per gas station.
- But not everyone has a car. I figure that here about two people for every one car in operation in this country (obviously children would not have their own car, while other families may only have one or none). So there should be one gas station for every 2,500 people.
- Since there are about 315 million people currently living in the United States, this amounts to 126,000 gas stations.
According to the US Census Bureau, the United States currently has about 121,000 gas stations, so this estimate is very close. And as I mentioned above, I got pretty lucky because I could have easily chosen a starting value that was significantly different, which would have yielded a worse result.
But some of the other values were not guesses. The second number – the percentage of gas sales that actually goes to gas stations – I once saw printed on a gas pump (it actually said 3 – 5%; I went with the latter). I also estimated how often the average car is refueled based on how often I, and others I know, refuel. Good estimation is a creative process where we use all the information that we have at our disposal, and put it together in a way that is logical to arrive at an answer.
I put this question to some of my students and one of them had this simple solution (roughly his words):
- There are about 3,000 people in the town where I am from. I figure there about half are of driving age, so there are about 1,500 cars.
- Since there are only one gas station in my town, I estimate that there should be about one gas station for every 3,000 people.
- If the US has about 300 million citizens, then I estimate there are about 100,000 gas stations.
Again, this is pretty close, and he arrived at the answer in fewer steps. It is all about experience and what information comes to your mind that seems relevant.
Have a better solution? Include it in the comments below, and be sure to check back for next week’s Thought Question.
Image Credit: Andrea Michele Piacquadio / Shutterstock.com