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Friday, Apr. 29, 2016

Bloated prices give consumpers pump anxiety

Thursday, September 14, 2006

Want to purchase gas at a competitive price?

If you're in Greencastle, your best bet is to drive out of town to fill up your tank.

At least drive as far as the Groveland BP on U.S. 36, where gas has been priced at $2.29 per gallon for regular unleaded since Saturday.

Greencastle's gas prices have been running an average of 10 to 20 cents higher than the surrounding communities of Brazil, Crawfordsville and Plainfield most of the summer, and even as gas prices are reportedly dropping on a national level, the Greencastle gas prices still run higher than surrounding communities.

So, why are prices so different?

As a private owner selling the BP brand, Judy Rozelle of the Groveland BP and McPherson's Market, said she is able to set her price without input from the corporate level.

"I just want to be competitive," Rozelle told the BannerGraphic in discussing her lower-than-Greencastle prices. "That's how my mindset is."

Her price of $2.29 on Wednesday was a carry-over from Customer Appreciation Day that she hosted on Saturday. The price dropped to $2.25 Thursday morning.

"We had lines backed up," she said of Saturday's low gas price. "It was our way of giving back to the customer."

But in Greencastle, are the gas retailers more interested in "taking from" the customers?

Gas prices in the city continued to hover in the area of $2.42 to $2.49 per gallon on Wednesday. In Crawfordsville, gas was priced at $2.27 In Brazil, it was $2.33. In Plainfield, gas was $2.21.

According to the AAA Hoosier Motor Club daily "gas gauge report" online, the state average Thursday was $2.38 per gallon.

So why is Greencastle gas costlier?

No one can say for sure, except to say that the market sets itself.

Tom Sidel, district supervisor for McClure Oil, said the family-owned company usually follows the major marketer in the area, and that is usually Speedway, which is owned by Marathon Oil. Then, the price is "restored" to the reasonable market price to make it competitive.

In Greencastle, the McClure station on Bloomington Street (price $2.42 per gallon Wednesday) tries to stay close the Swifty station just up the road (also $2.42).

"Every market determines its own price," Sidel told the BannerGraphic. "If no one goes down, we will stay, even if you hear that gas prices are dropping."

He acknowledged that can lead to customer frustration, and sometimes some nasty comments to the clerks behind the gas station counter.

"It puts us in an unfortunate situation, which our local office can't change," Sidel said.

Typically on fuel, he explained, retailers aim to make 10-12 cents per gallon profit. In a bad month, profit might only be 5-6 cents per gallon.

"A good retailer is not going to give away anything cheaper than they have to. That's just good business," Sidel said.

Rozelle at Groveland agrees. She said she tries to price her gas at 10 cents above her cost. That draws people to her business, where they hopefully go inside to purchase convenience items. And, that is where she makes her biggest profit -- sales of pop, chips and other items when people go inside to pay for their gas.

Sidel agrees that convenience sales are also where McClure makes its money.

But that doesn't answer the question of why Greencastle gas prices are higher than surrounding communities.

"That's a good question," Sidel agrees, noting the city's location north of U.S. 40. "It doesn't seem that Greencastle has a major highway running through it, like Crawfordsville, or Brazil being on U.S. 40."

Rozelle agreed that the Greencastle price difference is "hard to figure."

"I've been in this business a long time, and it never used to jump like this," she said of the prices during the last five years.

At the Groveland BP, Rozelle said she sells about 6,000 to 7,000 gallons of fuel per day. Each tanker can bring in about 8,000 gallons, she said, and she usually receives one fuel delivery per day.

While the higher gas prices have a negative impact on Greencastle consumers, some local retailers also worry the prices are driving shoppers away to other cities.

"As a retailer, we hope people understand the gas prices they see don't reflect other Greencastle retailers as being overpriced," said Sue McCune, owner of Ace Hardware in Greencastle.

"Gas stations are giving a perception that retailers in general are overpriced, and that's not good for business," she said.

A quick drive through Greencastle early Wednes-day afternoon revealed that gas stations do try to stay close to their nearest neighbor in pricing. On North Jackson Street, gas was at $2.43 for both the Marathon and the former Shell station. On Washington Street, the Clark station was priced at $2.46. On Indianapolis Road, the BP Amoco and Speedway stations were both at $2.49. And on the South Side, Citgo was priced at $2.43, just one penny higher than McClure and Swifty.

Linda Casey, spokesperson for Marathon Oil in Finley, Ohio, said prices for Speedway stations are set based on several factors, including the wholesale cost of gas, transportation costs, supply and demand, cost of running a station, and competition.

That competition in Crawfordsville, Brazil and Plainfield has two big factors that Greencastle doesn't -- gas stations at the Kroger and Wal-Mart stores.

"You nailed it when you said Wal-Mart sets prices," Casey confirmed of the market comparison. "They make up their profit on sales inside the store."

Wal-Mart and Kroger are so large they can afford to take a loss on their gas if it gets the consumer to come inside the store.

Casey said that a check of the gas commodity market shows the wholesale price of regular gas at $1.57 per gallon on Wednesday. Adding on the average of 65 cents per gallon for state and local taxes takes the retail cost up to around $2.22 per gallon. So if Wal-Mart sells gas at $2.19 at its station in Crawfordsville, it is probably losing money on gas sales.

The highly visible nature of gas prices also factors into consumer demand.

Gas prices are one of the few items that are posted in big letters to attract consumer attention. Another item with visibly-posted prices -- cigarettes -- are also used to draw in consumers, as in the case of Swifty, which has no other major convenience sales at its Greencastle station.

As for placing pressure on Greencastle gas retailers to lower their prices, Casey suggested the only major influence might come from having the competition of Kroger or Wal-Mart to drive prices down.

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