Opinion
Sometimes things happen that don’t seem random. Take for example a few weeks ago when my husband and I were headed out shopping. I glanced up at the sign at the corner gas station and at the time, the price of a gallon of gas was over $3.75. I asked my husband, why are Kewanee’s gas prices still so high? After all, people all over the county and the country were beginning to enjoy lower fuel costs. Why couldn’t we?
His answer was that prices have always been higher in Kewanee. That probably sums it up but it didn’t provide me with any answers and I wondered if I might try to get to the bottom of it and write a column. A few days later, among the Facebook messages to The Kewanee Voice, was a question from a reader inquiring about that very subject. Why was Kewanee’s gas so much higher than other towns in the area? He wondered if we could find out.
Knowing what I knew, having asked at local stations before and gotten a reply that they don’t set their gas prices, I told the reader that I would try to find out, although I couldn’t promise I could get the answer.
So did I get the answer?
Yes and no.
When tackling this issue, the first thing I wanted to do was to verify actual prices of gas in the surrounding area. Was Kewanee’s gas prices higher? They sure seemed to be and I had seen a recent post on Facebook from Kewanee residents chiming in on the prices of gas in other towns. But getting a confirmation and learning the actual price difference between Kewanee and other areas was step one.
We called around to various stations in towns such as Annawan, Atkinson, Bradford, Galva, and Neponset. A few of the stations outright told us that it’s illegal to give out gas prices over the phone. It’s not. And while we understood that we could simply look online for prices, we wanted a confirmation that the online prices were correct.
When several of the stations wouldn’t tell us their prices, and one manager said they don’t give them out over the phone for competitive pricing reasons, we hopped into the car and took a road trip to those places, hitting three towns before heading back home. They may not have provided prices over the phone, but they put them on a huge elevated sign out in front of their business.
What we found was that in places such as Annawan, Atkinson, Cambridge, and one station in Galva, prices were lower than in Kewanee. Two weeks ago, on a Wednesday, prices in Kewanee ranged from $3.76 a gallon to the highest price of $3.77.
In Galva, on that same day, we found one station selling gas for $3.49. The two other stations in Galva were selling at $3.76, so relatively the same as in Kewanee. In Atkinson and Annawan, along the interstate, gas was selling at $3.49 a gallon. In Annawan, two stations were selling at $3.54. Over in Cambridge, gas prices were $3.59 at the two stations there.
In Bradford, a little village well off the beaten path, gas at Casey’s was selling for just $3.34, one of the lowest in the area. Neponset’s station was at $3.60 that day. Over in Princeton, two stations, one a Beck Oil, was selling at $3.35, while we found one station as low as $3.11. In Geneseo, prices averaged around $3.59.
On average, at least on that day, and with very rudimentary calculations, gas prices in the area were around $3.51. In Kewanee, prices were around $0.025 a gallon higher than the average of those particular locations. I realize that is just an average, and there have no doubt been times when Kewanee residents were paying even more than $0.25 and probably times, they were paying less. But even that quarter adds up. If your tank is around 16 gallons and it takes an extra quarter for each gallon of gas to fill it, and say you fill your tank once a week, that comes out to an extra $200 a year.
The frustration Kewanee residents have been feeling is understandable. Kewanee has the highest percentage of poverty when compared to other towns in the area. In Kewanee, 20% of families live in poverty, compared to the entire county, with a poverty rate of just 8.7%. Compare Kewanee’s poverty level to that of the entire country at 11.5% of US families living at or below the poverty level. Kewanee is a community least able to bear the burden of higher gas prices, yet here we are.
So how did we get here?
For years, at least it seems that way, Kewanee gas prices have remained consistently and stubbornly high. And for just as many years, I have heard a rumor about how gas prices here are set. It goes something like this: The store managers all go out and look at the other stations’ signs and that’s how they set their prices. While working as a city reporter for the Star Courier, I soon learned that there usually is a kernel of truth to every rumor. But is this one true?
It sure seems like it, at least the part where stations keep their prices competitive with other stations. When the price drops at one station, all of the other stations respond by lowering their prices to compete. In fact when I inquired about how gas prices were set with one owner of an independent station, he asked me to accompany him outside and told me to look at the sign of the station down the street. Their price was two cents cheaper than at his station. “If I don’t lower my price I am not going to get any customers,” he told me. That’s definitely true.
But the reverse of that is true as well and therein lies the problem. What if one station decides to keep their price high? Then all of the other stations do as well. And as long as one station keeps their prices high, then Kewanee residents pay more.
The next step was to go to the stations and ask for the person responsible for setting prices. My first stop was Beck Oil. I was given the number for the human resource person and a name and I thanked them and left. On the way out, I couldn’t help but see the irony of the Star Courier’s headline on the stands. An Associated Press article declared: “Gas prices haven’t risen in 10 weeks,” with a photo of someone buying gas at $3.19 a gallon. While it was good to know that that prices hadn’t risen in 10 weeks, I mentally noted that in Kewanee, they hadn’t fallen either.
I made my rounds to all of the stations and most, but certainly not all of them, either spoke directly with me or handed me over to the person I needed to speak with.
At one station, the manager was frank when asked who set their gas prices. “Becks,” he said. I asked him for clarification and he responded that they price their gas at what Becks is selling gas for, and of course, he added in Casey’s.
Those were the two stations I most wanted to talk to or the people at those stations who could tell me how their prices are set, and I regret to inform you that after several attempts, emails, messages left, those are the two stations that I have yet to hear back from. And that highlights the reason I told our reader who reached out to us asking for answers on this issue that I would try, but couldn’t promise to deliver.
I did however speak with the owner of Johnson Oil Shell station. A very nice woman by the name of Kathy Peugh. Her father started the company and she runs operations now. I told her what I was trying to find out and she confirmed what I pretty much already figured out.
“We try to match our competitors,” she said.
Kathy asked if I remember the time of the gas wars? As of Wednesday, Johnson Oil prices were the lowest in town at 3.41. She wasn’t the only owner to tell me that stations need to make some profit on gas, and there is very little profit to make. In a 2022 survey of profit margins of 30,000 gas stations, a writer for Fortune magazine found that their net profit per gallon was around $0.03-$0.07-after factoring in costs like labor, utilities, insurance, and credit card transaction fees. But a new report published in July of 2023 sheds some more light on the profitability of selling gas.
Senior columnist for Yahoo Finance Rick Newman reported that “profit margin on gasoline is about 77% higher than in May 2019, the first month for which government data is available. Compared with February 2020–the last month before the COVID pandemic erupted–gasoline margins are 62% higher. The latest numbers are for May 2023.”
One manager of a station bluntly told me that stations have to make some profit on gas, and I don’t think anyone in Kewanee would fault them for that. But there are lower prices in other communities. Are those stations not making a profit at those lower prices? It’s hard to believe they aren’t.
One independent owner told me that with just two tanks, he’s at the mercy of whatever fuel costs are when the truck delivers his gas. Deliveries for that station come about every seven to 10 days, so if he pays more for that fuel and prices go down, he’s already behind the eight ball. Other stations in town, he said, have several deliveries of fuel a week.
Of course, many convenience stores make their profit on items other than gasoline, and at gas stations, the money is made inside the store. The typical gross profit margins at convenience stores for items like health and beauty and candy typically have profit margins at about 50%. Beer, cigarettes, bottled drinks and general merchandise also have healthy bottom lines, according to a 2022 report from the Hustle that took a deep dive into the matter.
As of Thursday, Dec. 14, prices had dropped in Kewanee. They quickly toppled in a two week period from $3.76, down to $3.69 before falling in the $3.50 range. Most stations are now selling gas for around $3.43 a gallon. The price drop comes after a discussion on a local Facebook post allowed Kewanee residents to express their displeasure and frustration at seemingly paying more, while other communities enjoy lower prices.
It’s hard to say how long Kewanee will see lower prices and if prices have reached bottom. While still not as low as Casey’s in Toulon, which a gas app showed was $3.25 yesterday; or Sheffieild’s or Buda’s Casey’s, which was at $3.31 on Thursday, it has dropped $0.33 in the last few weeks. The problem is that when the price of oil drops, it takes a long time for the price drop to reflect those lower costs at the pump. The second oil goes up, that cost gets passed along to us.
I am still hoping to hear from the two stations where I inquired. We simply would like to know why our gas prices appear to be consistently higher? If they reach out to me to let me know, I will be more than happy to pass the information along to our readers. But without a good reason as to why Kewanee residents bear the cost of higher fuel prices, I am almost forced to conclude that there isn’t one.