But the question asks you to state what you think is "most likely" to be damaged. So you sort of have to project scenarios in order to assess the probability. All things told, in my mind the gas sellers will suffer more than a city when demand for gas drops.
I really don't this is a valid thing to assume at all - we don't know enough about the city. However it is perfectly reasonable to assume that the gasoline sales are related to the success of the service stations in a very critical way - we know enough about what a service station does. That juncture is a major deciding factor for me. Yeah, it's an assumption, but a solid one. Without some sort of projection into the unknown you could call the ambiguity card on all the answers. To me, A has the least amount of ambiguity in that the damage will be most prominent.
I don't think your three scenarios for the gas station have equal probability at all. (1) is almost a 0 probability (obviously they wont lose ALL business), and we can quibble over the spread between (2) and (3) though I don't see how it is possible that the city's move wont affect them at all.
As for the city, remember what the overarching goal is? To stave off the microrecession it anticipates if the gas price issue is not dealt with. So they're literally doing what they are doing in order to try and IMPROVE or at least stabilize local business overall. Since the question tells us that we can assume everything in the opener is true, it's actually quite likely that the sacrifice in transport revenues will be made up for in terms of a better overall economy!
Sometimes it's good to take a more objective approach like you're suggesting, and try to find the answer that has the least amount of ambiguity. But in this case I don't think that's necessary since enough stated and implied and inferable facts exist to make the case that direct sellers of gas will be the most affected (aka damaged).
But I have been grossly wrong before, and I suppose the OA will settle it. Watch it be D or something