Americans wonder when high gasoline prices will end
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Though Americans have always been quick to bemoan the high cost of living, few things have created more recent attention than the soaring cost of gasoline.
When automobile prices rose dramatically in the ’80s and ’90s, people began talking about “sticker shock” when they visited their local dealership and saw cars that cost more than some buyers had paid for their first homes. Now we’re experiencing “fuel-pump shock,” as consumers have watched gas prices climb over the $2 mark and hover around that price point in Warren County for some time.
When is this going to end? Are gas prices doomed to stay around $2 a gallon. Is anybody getting their pockets lined out of this deal?
Most Americans realize gas prices are volatile. Many remember the gas wars of the ’60s when prices dropped to rock-bottom levels as service stations vied for business.
The oil embargo of the ’70s had people waiting in line to get gas. Not surprisingly, prices soared and many began making accusations of price gouging.
Now, in the wake of rising prices, some are once again suspicious of price gouging. And the evidence seems to be there, at least on the face of it.
Many motorists have noticed that in Manchester at retailers near the Interstate, gas prices are around $1.87 per gallon for regular. Meanwhile, here in McMinnville, some stores are charging up to $2.04 per gallon.
Why the 17-cent difference 20 miles down the road?
But price gouging is not the case, says Gary King, president and owner of Canter Oil in Shelbyville. King owns and supplies many of the stores near the interstate in Manchester. He says the reason is pretty simple.
“Competition sets it,” King said. “There’s no science to it.”
King says gas stations, many with large convenience stores, need to attract customers. The quickest way to do that is drop gas prices.
“They mark it down,” King said, “and you know what? I’m across the street and I’ve got to match that. I don’t like it, my banker doesn’t like it, but I’ve got to match it or I’m going to go out of business.”
King says some companies will even lose money, for a time, to pull in business. There’s no way he can stay in business selling $2.04 gas when the station across the street is selling it for $1.87.
“They’ll sell it below cost,” King said. “I know that’s hard to believe, but it’s the truth.”
King says these tactics, basically a more subdued version of the gas wars of the ’60s, can happen all over, depending on the situation.
“I’ve seen McMinnville cheaper than Manchester,” he said.
David Harris, of Fast Petroleum here in McMinnville, agreed with King.
“A lot of it has to do strictly with competition,” Harris said.
But there are other factors that control prices, according to Harris.
“Some of the locations down in Manchester that are selling so low sell a huge volume,” Harris said.
Harris indicated stations along interstate exits can move 140,000 to 160,000 gallons per month, while most of the stations his company supplies locally run 30,000 to 40,000 gallons per month on average.
“They can spread their fixed cost out over a larger number of gallons,” Harris said, “therefore they’re able to charge less.”
But in the end, Harris said everyone is at the mercy of crude oil prices.
“Gasoline is a commodity,” Harris said. “It’s traded on the New York Mercantile Exchange, and that affects how our buying price goes on a daily basis. We may see a one cent change from day to day, and I’ve seen here recently as much as five or six cent swings from day to day.”
Harris said this situation may cause prices locally to drop more slowly than high volume areas, since it takes longer to move higher priced gas out of tanks at lower volumes.
Harris says consumers are about to get a little relief, prices are dropping to around $1.99 per gallon at many local retailers, but there doesn’t appear to be any kind of major relief coming since there are a number of economic interactions driving global prices, not the least of which is the U.S. government’s own energy policies.
“Quite honestly there’s no real easy answer when it comes down to it,” Harris said.
Local gas prices as of Friday afternoon:
• Raceway $1.94
• Mapco $1.96
• Westwood Amoco $1.99
• Chancery Street Shell $1.97
• Country Club Market $2.02