Commonwealth Journal

October 24, 2013

Council rethinking praise for gas prices

by Heather Tomlinson
Commonwealth Journal

Somerset —

City officials are afraid they spoke too soon.
Less than two weeks after members of Somerset City Council praised local gas retailers for seemingly keeping their prices in line with regional and state-wide gasoline providers, local gas prices took a significant jump — from around 3.13 per gallon to roughly 3.43 per gallon — within a day’s time. 
And city officials aren’t very pleased.
“I think I bragged on them too early the last meeting,” said Councilor John Ricky Minton during the Monday, Oct. 14 city council meeting. 
City councilors, led by Minton’s vocal opposition to what are perceived as unfair local gas prices, have long expressed frustration with local gas stations. Their concerns raised to such a fever pitch that they staged a “meeting of the minds” in August with local gas station owner Charlie Patel, Micky Williams, one of the voices of a community group created to demand fair gas prices, Somerset Mayor Eddie Girdler and Pulaski County Judge-executive Barty Bullock. 
City Councilors Minton and Donna Hunley also attended. 
“We thought maybe the companies have gotten the message ... through virtually your efforts and speaking up in city council,” Girdler told Minton during Monday’s meeting. “But unfortunately, it looks like they’ve called our bluff again.”
Minton is demanding to know why gas prices are set the way they are locally. The answer is a complicated, convoluted one. 
Stefanie Griffith, with the public affairs department of Marathon Petrolem Corporation (which operates the Speedway gas stations and sells Marathon-brand gasoline to independent gas station providers as well) said that a number of factors go into gas prices at the local, or “street” level.  Griffith said gasoline providers are always checking their local competitors in determining how to set prices. 
In Somerset’s case, a significant number of stations are located along U.S. 27, within just a few miles of each other. 
“It is common for each of the marketers to access what their competition is doing on a daily or more frequent basis and some may do this by driving around to see what others are pricing fuel at,” Griffith said. “Hence, why you see the different prices as it is all driven by this local competition. Each marketer will then decide if they want to make a change to their price or not.”
Tim McGurk, with public affairs for the Kroger Mid South Division, corroborated Griffith’s statement’s about how local gas providers operate.
“Our Somerset store teams visit the other gas retailers twice per day to compare prices,” McGurk wrote in an email to a CJ reporter. “We never lead prices up in Somerset, we simply make sure that we are priced competitively in the market.”
A majority of regular Kroger customers have “Kroger Plus” cards, and they often receive a discount of a minimum of 3 cents off the street price of gasoline per gallon, which automatically puts Kroger’s stations a few cents below other local providers. Those discounts can even get as high as 10 cents off per gallon, depending on points accumulated through shopping. 
But that aside, city officials are saying that local competition is sorely lacking. 
“When’s the last time we actually got a deal on gasoline, when one used its competitive advantage to get a sale?” asked Girdler. 
“We have no competition in this town, true competition,” said Councilor Jim Rutherford. “Where people want to treat a customer right at a decent price ... These places are like ‘You know what, we’re okay where we are and we just won’t compete with each other.’”
Minton said he received a flood of phone calls from constituents when the gas prices jumped after they held steady for several weeks. Minton said he’s been told that many gas station operators receive a phone call daily from suppliers on where to set prices. Minton suggested that those phone calls count as collusion, which is defined as secret agreement of cooperation between parties (usually businesses), especially for an illegal purpose.
During Monday’s meeting, several councilors wondered aloud whether Speedway was the first provider to “pull the trigger” and change prices. 
“Everybody I’ve talked to has said Speedway is the one who controls it,” said Minton. “I had my doubts at first, but now ...”
Consumers and officials alike, frustrated with the difference in Somerset prices compared to other areas in the state, have been quick to point the finger at Somerset-based Cumberland Lake Shell. 
But either way, no matter who changes prices first, councilors are fed up with it. 
“People let’s do something. Let’s not keep talking about it,” said Minton. “They’re sitting there stuffing money in their pockets laughing at us.”
Minton asked that the city look into operating its own gas station — a request that has been tossed around in the past.
Girdler said free market forces, when they work correctly, should encourage competition. But he said he’s not against the city forcing a sense of competition. 
“It’s wrong to gouge Pulaski County and Somerset for greed,” said Girdler. “ ... We pretty well know we can sell to the public ... it’s about finding the right station, the right location.”
Minton also asked that Somerset City Attorney Carrie Wiese draft an official letter to each of the local gas suppliers — Cumberland Lake Shell, Southern Petroleum, Marathon and Speedway, Kroger and Walmart (Murphy Oil) — asking for an explanation behind the gas prices. 
The other councilors seemed to be in agreement with Minton’s request.
“A 45-cent bump overnight is a little much to explain,” said Rutherford. 
“It hurts a lot of people,” said Councilor Mike New. 
The city has attempted to open communication channels with local gas providers in the past, with little luck. 
“It’s worth a try,” said Girdler. 
Councilors Linda Stringer, Jerry Girdler, Jim Mitchell and Tom Eastham didn’t attend Monday’s meeting.