Price war brings some gas prices below state average

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Motorists here who have resigned themselves to paying more than $2 a gallon for gasoline might want to look for an excuse to visit the city's southern edge where the Shop 'n' Hop store is selling regular unleaded for $1.85.9. That's about a quarter less a gallon than many gas stations and convenience stores in Steamboat Springs, and a penny less than the lowest price AAA of Colorado could find in Denver on Wednesday.

Some consumers might question the wisdom of driving across town to save 25 cents a gallon on gas. But try to tell that to Jim Nelson. He was standing on tiptoes to clean the windshield of his Winnebago on Thursday morning while filling his 100-gallon tank.

"This is great!" Nelson exclaimed.

Shop 'n' Hop isn't the only gas station along U.S. Highway 40 on the city's south side selling gas for less than $2. South Side Station, with Shell pumps and a new convenience store, posted a price of $192.9 on Thursday. Owner Denise Peterson acknowledged she has moved her price down a couple of times in reaction to the Shop 'n' Hop prices less than half a mile away. Peterson, who is relatively new to the gasoline business, said she has learned that consumers are more price sensitive than she realized. Car trips on an unrelated business have taken her past her competitor's pumps numerous times this spring and the sheer number of vehicles at the pumps confirms it.

She was charging $2.12 a gallon until she concluded it was time to "experiment a little bit."

Even at today's high prices, gas stations only make pennies a gallon on gasoline, Peterson said.

"We noticed a fair amount of cars going into Shop 'n' Hop," Peterson said. "You make your money on the convenience store."

Peterson decided to test the theory that if she lowered her prices closer to those at Shop 'n' Hop, her store, her car wash (which Shop 'n' Hop does not offer) and the liquor store in her building would see improved sales, she said.

"We came down (in price) and they came down. We came down, and they came down," Peterson said.

Longtime Shop 'n' Hop manager Rene Juedemann declined to comment. Owner Terry Morcum, with offices in Avon, was not available for comment Thursday.

Kelly Gilstrap of On the Way Market said 85 percent to 90 percent of the price of gas is determined before it arrives in Steamboat. He said he pays 8 cents a gallon in freight to get gasoline to his west side convenience store. He sells under the Conoco brand and was getting ready to lower his price at the pumps by a nickel from $2.14.9.

Gilstrap pointed out that gasoline retailers are about the only business that puts its price out on the street. He had grown accustomed to seeing the wholesale price of gas growing by 3 to 5 cents a gallon at regular intervals late this spring. Just this week, the price retreated by about 2 cents, he said. Gas stations in Steamboat can't pump the volume that Denver stations do, and thus must amortize fixed costs over lower volumes of gasoline, he added.

Many consumers overlook the fact that nationally, taxes account for 31 percent of the cost of a gallon of gasoline. Taxes are higher here.

In Colorado, motorists pay 22 cents in state tax for every gallon of gasoline. That compares to 14 cents of state tax in Wyoming and 31 cents in Wisconsin. The total tax on gasoline in Colorado, including federal tax of 18.4 cents per gallon, is just more than 40 cents per gallon.

The U.S. Department of Energy reports that in 2002, when the average cost of gas was a mere $1.35 a gallon, and crude sold for just $24.09 a barrel, crude oil accounted for 43 percent of the cost of gas, another 13 percent went to refining cost and profits, and 13 percent is attributed to distribution and marketing.

Crude oil peaked recently at about $42 a barrel. That's a convenient number, AAA's Mary Greer pointed out, because a barrel of crude yields 43 gallons of gasoline. Do the math and that means the cost of crude now contributes $1 to the retail price of a gallon of gas. Add an additional 40 cents for tax, and there's 70 cents left to cover for distribution and marketing, refining costs, overhead and profit.

Nelson, the Winnebago owner, said that even though he was thrilled to find gas at less than $2 a gallon for his monstrous fuel tank Thursday, the price of gas has not changed his driving habits. He and his wife have enjoyed going out of their way to find the most scenic routes in their travels across the West this spring.

"Gas is still the least expensive thing there is," Nelson said.

-- To reach Tom Ross call 871-4205

or e-mail tross@steamboatpilot.com

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