G.C. gas prices remain higher than average

10/27/2012

By ANGIE HAFLICH

By ANGIE HAFLICH

ahaflich@gctelegram.com

As gas prices have been on the decrease nationwide, regular unleaded gas prices in Garden City were higher than the national average of $3.58 per gallon, ranging from $3.69 to $3.79 per gallon as of Friday, according to www.kansasgasprices.com.

The website also showed local gas prices ranging anywhere from 57 to 67 cents per gallon higher than in Topeka, where they ranged from $3.12 to $3.20 per gallon.

Patrick DeHaan, senior petroleum analyst at gasbuddy.com, said that the biggest contributor to the difference in prices has to do with competition.

"Garden City has a fraction of the stations. There just isn't the competition there to drive prices down, and it may come slowly, but how quick gas prices fall is a function of who's pushing them lower," DeHaan said. "And in big cities, say Topeka, there are more competitors that may be vying for volume, and in Garden City, there may be less competition or less aggressive competition."

DeHaan said that gas stations don't have an incentive to drop prices because of the subsequently lower profit margins.

"Now, they do eventually lower their price, as they make money, but if nobody's going to drop the price, from a business standpoint, stations obviously don't want to sell a product for less money, so what they do is they just take their time," he said.

Another factor behind the higher prices in not only Garden City, but also in other southwest Kansas communities like Hugoton and Liberal, where gas was at $3.79 and $3.75, respectively, on Friday, is the price that stations paid for their most recent supply of gas.

"Gas stations in say, Garden City, probably aren't selling a whole lot of volume. Normally, gas stations will buy gas every two to three days. In Garden City, it may be four to five, so they like to sell through their higher-priced inventory before they lower their price and buy another supply of gasoline. So that's certainly a culprit, as well," DeHaan said, adding that those stations that paid a higher price for gas will be less likely to be aggressive in terms of dropping their prices.

Therefore, until a station opts to lower its prices and other stations follow suit, gas prices in Garden City and other small communities in southwest Kansas could remain higher than in other areas.

"It's all a function of who's going to take the first step and start dropping their price and if anybody's going to be aggressive, but then again, why would they, when they make less money that way," DeHaan said.

As of Friday morning, Garden City's high price of $3.79 dropped to $3.69 per gallon, indicating a possible trend toward declining prices, but DeHaan said that it might take a few days for prices to drop to the levels seen in the bigger metro areas of the state.

According to www.fuelguagereport.aaa.com, on Friday, the national average gas price was $3.58, a 14-cent decrease from a week ago and a 23-cent decrease from a month ago. The average price for a gallon of unleaded gasoline in Kansas was $3.40, a 17-cent drop in the past week and a 40 cent-drop in the past month. In Garden City, average gas prices have dropped by seven cents in the past week and 12 cents in the past month.

"Wholesale gas prices have gone down because in the autumn, demand for gasoline typically wanes as the cooler temperatures prevail. Demand drops spur an increase in supply, which is pushing things downward," he said.

While the price of oil also plays a factor in gas prices, DeHaan said that the two don't always move in the same direction.

"People are so infatuated at looking at the price of oil that they forget that, just like oil is publicly traded at a price quoted, so are gasoline futures. What looking at gasoline futures takes into consideration is the health of refineries. Because if refineries aren't producing ... it's a kink in the system. You could have $10 a barrel oil and you could have $5 a gallon gas, if the refineries are outputting at a trickle. So, the refineries are a wild card," he said.

DeHaan said that while distribution costs to rural areas, such as southwest Kansas, play a part in the higher prices, that it is minimal.

"It may be a few more cents a gallon to get gasoline out there. I wouldn't think it's substantial," he said. "It's coming a decent way, but it's only going to add a few cents per gallon. I mean, we're talking about a 10,000-gallon tanker — it's not going to add up to a whole lot."

In comparing southwest Kansas communities on Friday, Garden City's average price for a gallon of unleaded gas $3.69, Dodge City's average was $3.60, Liberal's was $3.71, Syracuse's was $3.40 and Scott City's was $3.57.

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