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Pumped up about dip below $3?

Not so fast: Price might be ‘too low’; stations constantly monitor others in the area

Published: Wednesday, Nov. 6, 2013 1:15 a.m. CDT

DIXON – For now, filling up your car in Dixon may be a little cheaper than it has been the past few years.

At least five Dixon gas stations on Tuesday were selling a gallon of regular unleaded gasoline for less than $3 –  some $2.99 and some $2.97. According to Sauk Valley Media records, it’s the cheapest price for a gallon of gas in Dixon since Jan. 31, 2011.

Also on Tuesday, the average price of a gallon of gas in Illinois was $3.301, according to GasBuddy.com, and the average price in the U.S. was $3.244. The highest price for a gallon of gas in the state is $4.09 a gallon, at two Chicago gas stations, and the lowest price is $2.89, at a gas station in Pana, which is about 45 miles southeast of Springfield, according to the website.

RJ Rymas, director of fuels for Road Ranger, said gas stations react to others in the area.

“Everybody is looking at everyone else pretty much all of the time,” he said, adding that the Murphy USA gas station on Galena Avenue influenced the decision by the Road Ranger corporate office to lower the price to $2.99 at its Galena Avenue location.

“We don’t survey the entire market,” Rymas said. “We survey those that are close to us. I can say that Murphy, who is right up the street from us, they went to $3.04 over the weekend.”

While Road Ranger sets its prices at the corporate level, Casey’s General Store Vice President of Finance Brian Johnson said local managers are responsible for monitoring the competition and setting the price.

“Absolutely we check the competition,” he said of its strategy. “We check the competition several times a day. We say that we won’t be undersold.” 

But Johnson added that the corporate office must approve a lowering of the price to the point that the station will lose money. Going that low almost never happens, though, he said.

Gas stations will stay low until they can’t keep up anymore, Rymas said, “or if somebody is willing to not make a profit.” The $2.99 price right now is too low, he said.

But Rymas said that $2.99, while not significantly lower than $3.04, makes a big difference in the customer’s mind.

And for Road Ranger and Casey’s, offering gas serves another purpose: it gets customers into the store, which is where they can see greater profits.

Casey’s, which is a publicly traded company, made only 15.2 cents a gallon of gas during its last fiscal year, Johnson said, and while gas sales made up 22 percent of its gross profits, prepared food made up 32 percent.

“We never want to give the customer a reason to go somewhere else to shop,” he said.

 

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