Tourism market, remoteness drive gas prices
May 27, 2014
Greg Laskoski hears about gas prices from all over — mostly stories of drivers who feel like they are getting gouged.
Ask the GasBuddy.com analyst why Garfield, Eagle and Pitkin counties' gas prices typically are the highest between Illinois and the West Coast, and he's blunt: "Retailers aren't bashful about charging higher prices in a tourism market," he said.
"We hear the same discussion about Cape Cod or the vacation spots in the Carolinas," said Laskoski.
The rub is that the vast majority of us who live here aren't free-spending tourists, and gas prices 25 cents a gallon higher in Glenwood Springs than in Frisco or 50 cents higher than on the Front Range just don't seem fair. Nor does paying 18 cents more than in Rifle, where the City Market fuel stop has rather famously driven prices down in recent weeks.
“We scale and leverage all of our buys to pass savings along to our customers.”
City Market spokeswoman
It's little consolation that prices in Vail were 15 cents higher on Memorial Day than in Glenwood. And let's not even think about Aspen, where prices over the weekend were $4.72 a gallon, generally a dollar more than in Glenwood.
What's going on?
Little in a consumer's daily life is less transparent or more frustrating than how gas prices are set.
Aaron Milton, commenting on the Post Independent's Facebook page, captured a lot of folks' sentiment: "You would think that as rural as Paonia [is], gas would be really expensive there. I paid $3.79 [May 21] for mid-grade.
"We get ripped off the further upvalley we go," he added.
Laskoski said retailers take delivery of shipments priced based on commodity prices, and their cost can vary significantly within 48 hours. Overhead varies from town to town and store to store, and business models and philosophies can be different.
The manager of a midvalley store whose prices are among the state's highest said "people can buy gas and pop anywhere. We try to know them and have a clean store." The manager, who asked not to be named because he doesn't speak for the owner, said the closer to Aspen a store operates, the more it must pay for good workers and, at least in some cases, for rent.
Across the country, everyone involved in selling gas protests that they barely make any money on it — which, Laskoski and others say, usually is true. Profit lies in beer, soda and other goods inside the store — and on volume.
Grier Bailey, manager of government affairs for the Colorado Wyoming Petroleum Marketers, said, for example, a station in Denver that sells 120,000 gallons a month can sell for less than a Glenwood station selling, say, 30,000 gallons a month.
It's also true that remote locations face higher shipping costs.
Almost all gas in Colorado is shipped from Denver, Bailey said. Distributors face a calculation in delivering gas — is it more expensive to truck gas west or to first send it by train to a terminal in Grand Junction?
In the case of Garfield County and the Roaring Fork Valley, retailers and their customers are paying for that added rail cost, explaining why, at some point on the drive east to Denver, gas gets considerably less expensive.
Now, about City Market, which opened a fuel stop in Rifle in April and led to a 20-cent per-gallon drop in gas prices around town. City Market is owned by Kroger, the nation's largest grocer.
Kroger and Walmart are among the retail giants that offer programs that reward loyal customers with deep discounts from already-low pump prices, and have fought in court for the right to offer those discounts.
"It's a very good business model," Laskoski said, though it's rough on small-town distributors and retailers, as Kirk Swallow, owner and president of Swallow Oil Co. of Rifle, has told the PI.
"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 last month.
City Market spokeswoman Kelli McGannon denied accusations that City Market's pump price is below its cost. "We scale and leverage all of our buys to pass savings along to our customers," she told the PI on Tuesday.
For a consumer in Garfield County or the Roaring Fork Valley, what's the solution?
Within the valley, it's possible to drive less, said Jesse Morris, manager in the Transportation and Electricity Practice at Rocky Mountain Institute, the energy think tank based in Old Snowmass.
VelociRFTA, the first rural bus rapid transit system in the nation, should prove about equal in cost to driving, cuts congestion and, because the buses burn natural gas, is cleaner, Morris said. He noted that bicycle infrastructure in the valley is constantly improving, and Aspen Bike Share, at $45 a year, eases transportation in town for people who ride the bus.
For real savings, Morris said, drivers who can might consider electric cars. He drives a Prius C that gets 52 miles per gallon. Trading for a Nissan Leaf, he calculated, would save $120 a month, provide thousands of dollars in tax credits and avoid the volatility of gas prices.
"Electric cars are an absolute out-of-the-park deal" for driving within the valley, he said.
Many people have to drive farther or can't afford a new car, and, in many ways, are stuck with gas prices as they are.
Said Denver-based Bailey, who represents gas distributors, "there's a premium for living in the mountains."
On the bright side, we don't live in Eureka County, Nev., where, according to GasBuddy's data, the county population of 2,000 and remoteness conspire to make some of the consistently highest gas prices this side of California. (Not counting Aspen, of course.)