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Old 09-27-2011, 10:09 AM   #3155
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St. Louis price war pulls down gasoline costs statewide

The Kansas City Star
STEVE EVERLY The Kansas City Star
Updated: 2011-09-27T04:41:14Z

Gasoline prices have finally fallen below $3 a gallon — but you have to drive to the St. Louis area to fill up at that price.

“They’re having an old-fashioned gas price war,” said Mike Thornbrugh, a spokesman for QuikTrip.

In the throes of the price fight, St. Louis area retailers have dropped the average price to $2.97 a gallon.

Gasoline prices have been tumbling nationwide, down an average of 20 cents a gallon to $3.50 as fears of a worldwide economic slowdown hammer the cost of crude oil.

In Missouri, however, the St. Louis price war has dragged statewide gasoline prices down an average of 30 cents a gallon.

Add it all up, the AAA says, and Missouri on Monday sported the lowest average statewide gasoline price in the country.

“It’s great news,” said Mike Right, a spokesman for AAA.

A few other places, including parts of Michigan and Texas, are enjoying prices below $3 a gallon. But most consumers were still paying more than that.

In the Kansas City area, average gasoline prices were $3.29 on the Missouri side and $3.37 on the Kansas side, where fuel taxes are higher.

In St. Louis, the price war is slashing the profit margins of fuel retailers.

Thornbrugh wouldn’t say who fired the first shot but said QuikTrip would be aggressive in staying competitive on prices in every market it was in. The convenience store chain sells gasoline in nine major metropolitan areas, including Kansas City and St. Louis.

Other retailers, however, are blaming QuikTrip for starting the price war and keeping it going.

“They’re the Wal-Mart of the oil business,” said Joel Platke, who owns a Shell station in St. Louis.

As a result, gas stations there are scrambling to figure out how to stay profitable and not lose customers. Most have chosen to slash pump prices to keep bringing in customers buying Cokes and potato chips, but some others have balked.

Platke said he was selling gas at $3.20 a gallon, leaving him with only a few cents of profit after paying credit card fees.

“It’s not a good day for the little guy,” he said.

Kansas City area gas stations have retail margins of about 30 cents a gallon, above the national average but still much lower than the profits earned by oil producers and refineries. Refinery margins, the difference between crude oil costs and wholesale gasoline prices, are now 65 cents a gallon, more than double what is normal for this time of year.

Privately owned QuikTrip has 580 stores, and many of its markets in the past, including Kansas City, have seen price wars. QuikTrip is the biggest seller of gasoline in the Kansas City area, and it usually sets the price that others follow in Kansas City and St. Louis.

Convenience stores such as QuikTrip have transformed the retail gasoline business by holding down the price of gasoline in hopes of recouping on sales of snacks, soft drinks and other merchandise. Gasoline — often aggressively priced — is used to draw customers.

Several years ago, the state of Missouri sued QuikTrip, accusing it of selling gasoline below cost, which a state law prohibits because it unfairly hurts competitors. QuikTrip initially lost the case but appealed to the Missouri Supreme Court, which ruled in 2004 that the company did not violate the law because the state had not proved that QuikTrip had actually harmed its competitors or intended to.

Even without a price war, consumers have benefited from lower fuel prices. Oil prices peaked in April, and gasoline averaged $3.90 a gallon in the spring. But this week that was down to $3.50 nationally, according to the Energy Information Administration. That drop is enough to give an average household with two vehicles about $50 a month to spend on something else besides fuel.

Lewis Adam, president of Admo Energy in Kansas City, which helps fuel retailers manage their purchases of gasoline and diesel, said recent movements in energy markets could possibly knock an additional 20 cents a gallon off pump prices, which would get area consumers closer to $3 gasoline.

“It could happen now,” he said.
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