KEARNEY — To motorists who believe there’s something fishy about Kearney’s gasoline prices, two local convenience store owners want customers to know there’s no price-fixing.
However, there is a tendency for Kearney’s smaller operators to follow pricing decisions of the market’s two largest players: Casey’s General Store and Pump & Pantry.
A similar “follow the leader” scenario influences pump prices in Grand Island, where retailers chase Sam’s Club. Recently, regular was selling for $2.12 per gallon at Sam’s Club and for $2.17 at most other Grand Island stations. On the same day, the prevailing price in Kearney was $2.20.
To learn more about gasoline prices in Kearney, the Hub asked five private operators if they would talk about the factors influencing their pricing decisions. Just two of the five agreed to interviews. The rest declined.
“I’d rather keep that to myself,” one said.
“No comment,” said another.
“I’m not going to say anything. It just gets everybody angry,” said another.
Of the two operators who agreed to talk, one did so if he could remain anonymous because his business is so competitive and because consumers are price sensitive with gasoline.
That operator said one of his most important daily chores is to set a competitive price for his gasoline. He passes by in the morning and records what competitors are charging, and does it again in the evening. He said he also talks with his store managers about prices they’re seeing outside of Kearney.
“We drive around and check prices at least twice a day,” said the operator.
On Aug. 12, the day he interviewed, Kearney prices equaled those in Hastings at $2.19 per gallon for regular. Grand Island’s price was a bit lower at $2.17 per gallon.
Trying to charge the same as the competition isn’t always possible, he said, but matching a competitor’s price doesn’t equate to price-fixing, which is illegal by federal law.
What determines the cost of crude oil?
The cost of crude oil is the largest component of the retail price of gasoline, and the cost of crude oil as a share of the retail gasoline price varies over time and across regions of the country. Many factors affect crude oil prices. Increases in U.S. oil production during recent years have helped reduce upward pressure on oil and gasoline prices.
Source: U.S. Energy Information Administration/February 2020
“I don’t want to know what the penalty is for price fixing. That’s a crappy thing to do if anyone ever did that,” he said.
The second operator was Chas Kleveland, who operates Foote Convenience Plaza on U.S. Highway 30 E. in Kearney. He said customers’ complaints usually focus on the price differences between Grand Island and Kearney, but people travel, and they spot lower prices in other communities and regions, and then wonder why.
“When you’re in the gas business you always hear complaints when it’s lower in a neighboring town, or even Oklahoma,” Kleveland said. “As far as gas goes, Kearney is in a little bit of a disadvantage because Grand Island is an at-cost or below-cost town.”
In other words, to compete with the market’s leader, Sam’s Club, some Grand Island retailers may be paying more for their fuel than they charge at the pump. Selling at a loss is a risky approach, said Kleveland.
He recalled when prices in Kearney were lower than most places in Nebraska because two stations — Coastal Mart and Gas Stop — were battling on Second Avenue in south Kearney to sell at the lowest prices.
“The average Kearney citizen forgets that Coastal Mart and Gas Stop engaged in mutually assured destruction,” Kleveland said. “Nobody in town could follow them, and nobody was making anything. Obviously, it didn’t work out for them.”
He said consumers may be unaware of the high cost of doing business. “When you have close to $500,000 in infrastructure you have to make at least 5%-10%. You just can’t sell it at cost for long.”
Kleveland said Kearney retailers must contend with at least two added costs. Labor is more expensive, and so is the wholesale cost of fuel. Most fuel sold in Kearney comes from Doniphan, where it arrives by pipeline and then must be hauled to the final point of sale. Kleveland said it’s a 15-minute drive from Doniphan to Grand Island compared to a 45-minute ride to Kearney, so transportation incrementally adds to the price of gasoline.
If they can’t buy fuel at Doniphan, Kearney retailers might have to go to North Platte, Geneva or to a Kansas pipeline terminal to buy product, Kleveland said.
He said the thin margins on gasoline are illustrated by the evolution in the gasoline business from filling stations to convenience stores.
“The days of gasoline being a profit center left when the full service station died,” Kleveland said. “Now the pop, candy and cigarettes aren’t enough, so they have pizza or even ice cream or sandwiches.”
The operator who spoke anonymously agreed with Kleveland that charging too little for gasoline is risky, just as it’s risky to charge too much. Reining in costs is important, including the cost of fuel, which was inching up at the time of these interviews.
“The trucks are probably lined up today at Doniphan because people want to buy before the price goes up. I ordered a few loads to take either today or tomorrow,” said the operator on Aug. 12. “And the farther you are from a terminal, the more expensive it is to haul.”
He said wholesale prices took a dive in the early days of the coronavirus pandemic because people and many businesses were in lockdown. As consumption dropped, so did the wholesale and retail prices of gasoline.
“Spring was definitely nerve-wracking. It’s still nerve-wracking,” said the operator. “When I see the restaurants that were closed I feel very lucky and fortunate we’re able to remain open.”
His goal is to “run a good clean store that treats its employees and customers fairly,” he said. “I like seeing low gas prices. It’s good for the business and the community. Low gas prices are good for people.”
Extracted in full from: https://kearneyhub.com/news/local/local-gas-station-owners-say-they-follow-the-leader-when-setting-gas-prices/article_769ee2fa-e6ee-11ea-99fc-b31dcb466d7b.html