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Good old competition keeps gas prices bobbing up and down, experts say

Competition is perhaps the key driver in differing gasoline prices at gas stations within Indiana locales.
Posted on July 29, 2013 at 1:00 a.m. | Updated on July 29, 2013 at 5:21 p.m.

It’s not the bad old days of June, when the price of a gallon of gas in Elkhart went as high as $4.29.

Still, the current average in the South Bend area, about $3.63, exceeds the state average and the price per gallon in the Evansville, Fort Wayne and Indianapolis areas, according to GasBuddy.com. Per GasBuddy.com, Elkhart, Goshen and other north central Indiana communities are considered part of the South Bend area.

It’s got some wondering why prices are higher here and experts explaining the difference as chiefly a reflection of market forces and competition.

Indiana gas retailers get their fuel mainly from the same terminals around the state which, by and large, don’t offer wide fluctuations in wholesale prices, according to Scott Imus, executive director of the Indiana Petroleum Market and Convenience Store Association, a trade group. The difference comes when individual gas stations start competing with one another, raising or lowering prices to stay competitive.

Individual gas station operators aren’t necessarily cognizant of what’s happening, say, 50 miles away, according to Patrick DeHaan, senior petroleum analyst for GasBuddy.com. Rather, price fluctuations at the pump are more a reflection of what’s happening at the competing station across the street or up the road. Operators keep close tabs on competitors and adjust their prices accordingly, even temporarily pricing gas below its actual cost at times.

“And that decision is made every day at every location,” said Angelia Graves a spokesman for Marathon Oil in Findlay, Ohio, which is the parent company of convenience store and gas station chain Speedway.

That said, a gas station may buy gas at a particularly low wholesale price one week, lower than what a competitor gets next week. Those particulars in pricing points are usually secondary, though, to head-to-head competition.

The current $3.63 average in the South Bend area compares to $3.41 in Fort Wayne, $3.45 in Indianapolis, $3.57 in Evansville and $3.55 statewide, according to GasBuddy.com.

The average is nearly $3.75 in Gary in Lake County, but northwest Indiana is a particular case. Prices there are the highest, reflecting U.S. Environmental Protection Agency requirements that Lake County use a cleaner burning blend of gasoline to address environmental concerns in the Chicago area, Imus said.

SPEEDWAY: FIRST UP, FIRST DOWN

While competition may be the key ingredient in local pricing, an Elkhart gas station operator says one of the big players here is Speedway. As it goes, so go others here, said Jhaman Pirthyani, owner of a BP gas station off Nappanee Street in Elkhart.

“It is the first to go up and down,” said Pirthyani.

DeHaan said that’s common — a leader, usually one with many outlets, setting the pace in individual markets.

Broader fluctuations over time are more reflective of oil prices on global markets, experts say. Problems and issues at refineries, too, can bump prices up.

After local prices reached $4.29 per gallon in early June, for instance, Purdue University economist Wally Tyuner cited issues at four refineries, all suppliers to local gas stations.


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