Some stations selling fuel at a loss to compete

www.katu.com February 24, 2003

PORTLAND - Gas prices in the Portland area are just two cents away from it's highest ever. Back in the fall of 2000 the cost of regular unleaded shot up to $1.80 a gallon.

The spike in 2000 was after a big refinery fire that affected prices up and down the West Coast. In 2003 there's uncertainty in the Middle East, and labor issues in South America.

But folks KATU spoke with say when prices go up that gas station owners suffer a long with the rest of us.

It costs Tim Secolo 15 cents a gallon to sell gas at his Hillsboro Shell Station.

But when he set's his prices, he has to follow his neighborhood competitors. To meet or beat the competition he sometimes sells fuel at a loss.

"I'm just barely making it as it is. It's tough, it's a tough game. It's tough," says Secolo.

After his competitors, Secolo considers the demographics of his customers. All three stations in the area charge $2.17 a gallon for premium fuel. But Secolo says overhead in Hillsboro is high and his customers are willing to pay it.

One of those customers said "I don't even pay attention, to be honest with you."

Another reason that some neighborhoods are a little more expensive than others are something called zone pricing. For example a chevron station on NE Sandy has no competition. Gas suppliers know that, so they know they can charge the station a little bit more per gallon.

World events are the third factor in gas pricing. The chance of war in Iraq, and an oil field strike in Venezuela are both driving up the cost per barrel.

One place to find lower prices is at stations at grocery stores. Tim Secolo explains that grocery stores use cheap gas as a tool to bring in customers.

"They use gas as a loss leader, they sell it at a loss to get people into their store, and that makes up for what they don't make on the fuel," says Secolo.

Tim Secolo hopes that independent family owned stations like his can survive the higher prices.

Drivers in Washington are also feeling the pinch. They're just three cents away from their all time high price of regular gas. The all-time high was a $1.76 in October of 2000.

Right now the highest price in the country tonight is down in California where they're paying a $1.93 for regular unleaded.