‘10,000-pound gorilla’ worries Swallow Oil Co. of Rifle
May 3, 2014
While Rifle residents, truck drivers passing through and visitors have quickly taken to the low gas prices at the new City Market fuel station, there's one longtime local business unsure of it's own future.
Kirk Swallow, owner and president of Swallow Oil Co., has not welcomed the arrival of what he calls a "10,000-pound gorilla" with open arms.
"It's hard to compete with someone who can sell gas without worrying about making a profit because they sell groceries and make their money there," Swallow said on Monday, April 28, less than a week after City Market opened its pumps and caused other gas stations and convenience stores in Rifle to drop their gas prices by some 20 cents overnight to try to stay competitive.
Swallow owns some of those stations and supplies gas to the rest. He's had the Corner Store, at the corner of 9th Street and Railroad Avenue, for rent or sale for the last six to eight months. Swallow said business at that station declined greatly when natural gas workers left due to a downturn in activity in 2008 and afterwards, Swallow said. The Corner Store is likely to be operated as an unmanned station, "and we'll see if that works."
"So all the people who have bad mouthed me over the years need to pony up and try to make it in this business," Swallow said. "If I can't make it as a small station owner, I don't know who can."
Swallow refers to frequent criticism by residents and others about Rifle seemingly always having some of — if not the — highest gas prices in the region or state. That even led to a public meeting in 2009, held by then-State Sen. Al White, who had heard many complaints during his election campaign. Swallow attended the meeting and explained the complicated factors that go into determining the price at the pump.
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Those factors ranged from the price of a barrel of crude oil on the NYMEX exchange, rail transportation costs from Denver refineries to a Grand Junction terminal where Swallow's delivery trucks fill their tanks, high area real estate prices and wages (at that time) that he said kept his company from making more than a 5-6 percent profit. Credit card companies that charge from two to four percent on every gas sale was another factor. Swallow said Monday that up to 80 percent of all gasoline sales are made on credit or debit cards.
Swallow Oil Co. has operated in Rifle since 1951 and now employs between 45 to 50 people, Swallow said. What the future holds for the company and those workers doesn't look too rosy to him.
"A lot of the little guys, the convenience stores and such, in Grand Junction are gone or out of business" in terms of gasoline sales, Swallow said. "And it's all due to the marketing of gas by companies that don't have to make a profit on it."
Swallow also pointed to a quality issue, in terms of branded and unbranded gas. Swallow supplies higher quality gas, he said, to stations like Shell and Phillips 66, while City Market gets unbranded, or lower quality, gas from its Suncor supplier. Some automotive experts contend unbranded gas is not as good for automotive engines as branded gas.
Swallow also said the arrival of the City Market station in Rifle will likely mean he can't afford to donate to local causes and events as he has in the past.
"How many things does City Market and Kum & Go support in this area?" he asked. "I don't see their names mentioned. We help a lot of folks and causes but we won't be able to do that any more. Those guys just make their profits and send them out of town, too. All our profits stay local and are spent locally."
Swallow said while people complain openly about gas prices, they don't think twice about paying much more for everything else — from olives to toys to clothes — in Rifle compared to Grand Junction.
"I don't know why people are so vocal when it comes to gas prices," he added. "I guess it's all relative to where you are and what you have to do to survive."
Maybe not so bleak
However, Swallow's pessimistic outlook on his company's future may not turn out to be the case. Patrick DeHaan is a senior petroleum analyst with GasBuddy.com in Chicago. GasBuddy.com collects gas price data from across the U.S. and posts it online. DeHaan said usually what happens when a large company opens a low-cost gas station is the low prices don't last too long.
"What they're trying to do is build a customer base," he said. "City Market can charge a low price to undercut the competition and word of mouth will spread like wildfire. Everyone will hear about it and want to see for themselves."
Then, perhaps several weeks later, the company will start to raise their prices, DeHaan said, with the hope that customers will be loyal.
"People get addicted to those low prices and may not even notice when they gradually go up," he said.
DeHaan doubts the other gas stations in Rifle will be forced to close, although he added it could also depend on "who has the most backing."
"If the product is priced competitively, I don't think they'd have anything to worry about," he said.