Steamboat Springs Electrical contractor Yancy Price was using a debit card to fill his pickup with gas at the West Kum & Go in Steamboat Springs on Thursday after one of his employees pointed out they were paying too much for gasoline with their corporate card at another location.
“You can’t conduct business if you haven’t got gas,” Price said.
The price of unleaded gas dropped a nickel to $3.29 at some pumps in Steamboat this week, but the Steamboat average of $3.34 still left the price 56 cents higher than the $2.78 motorists are paying on average in Denver this week.
Price, who lives in Craig but owns a business in Steamboat, was wondering Thursday why gas is cheaper in Saratoga, Wyo., where he frequently travels on business.
Saratoga appears to be a remote town in southern Wyoming, but it’s just a few miles south of Interstate 80 and 30 miles from the Sinclair refinery outside Rawlins, Wyo. The price of unleaded in Saratoga was $2.95 on Thursday.
Unlike Price, most Steamboat residents look to Denver when drawing a comparison to gas prices in Steamboat. The Colorado AAA reported the average price for regular unleaded in Denver on Wednesday was $2.78, down from $2.91 as recently as Jan. 2.
Another customer at West Kum & Go, Tim White, asked the question of the month: “Are the gas stations gouging the tourists?”
As it turns out, the answer to that question is more complicated than “yes” or “no.”
Steamboat gas station owner Ulrich Salzgeber acknowledged that the gap between gas prices in Steamboat and Denver right now is greater than it should be.
“To be honest, in most cases the margin shouldn’t be that much,” Salzgeber said. “In a perfect world, it should be between 25 and 30 cents. I can’t purchase fuel up here for the same price they can in Denver.”
But the exercise of trying to unravel what amounts to a fair price for gasoline in Steamboat Springs is complicated by the reality that wholesale prices rapidly are changing, sometimes within the span of one day, Salzgeber said, and local convenience stores sell much lower volumes of gas than their Denver counterparts.
And there are legitimate reasons why gas stations and convenience stores here charge more than their counterparts in Denver as well as those in Saratoga.
The Denver Post reported this week that gas prices in Denver are low because of a glut of low-priced crude arriving there via one of five pipelines matched with the availability of just one refinery. It’s supply and demand.
Steamboat operators long have said that the price of gasoline is more expensive here because their fixed costs — their real estate and their payroll — are higher than on the Front Range. In addition, they pay higher freight on each tanker truckload of fuel.
“Freight costs are definitely a factor,” Mark Larson, an industry advocate, wrote in an email this week. “The West Slope has no pipelines or refineries to pull fuel from. They must truck their product from Denver, Grand Junction (a rail car terminal), or Sinclair (refinery) in Wyoming. That can add anywhere from 5 to 15 cents per gallon depending on where the fuel is being transported.”
Larson is the executive director of the Colorado Wyoming Petroleum Marketers and Convenience Store Association. He said the profitability of gas stations in small cities is impacted in several ways by the relatively low volume of fuel they are able to sell compared with a metro gas station.
“Obviously, metro property is not going to cost the same as property in the mountains. Payroll is a consideration, as well. And when those higher costs need to be satisfied by less volume, the retailer needs more margin to service the debt,” Larson said.
Salzgeber said that with wholesale prices changing almost day to day, the dozen gas stations here are likely to have paid different prices for their gasoline than the guy at the next corner. They all want to keep the retail prices on their signs within a narrow range and in some cases might find themselves selling gas at a loss, just to appear to be competitive and attract customers.
Salzgeber is in the unusual circumstance of owning a gas station that isn’t pumping gas this winter. He temporarily closed his unstaffed, credit-card-only Routt 66 station while he makes plans to transition into an unbranded filling station.
Salzgeber said that when he was branded a Phillips petroleum station, he was required to purchase a full truckload of 8,000 gallons of gas at a time. And because he could only take on 5,000 gallons of regular unleaded at a time, he was forced to buy and carry the cost of 3,000 gallons of medium grade and premium gas that sold very slowly at his pumps. The result was that he had to bear the cost of carrying an unpopular product.
He hopes that by collaborating with a couple of other unbranded stations, he will be able to sell regular unleaded gas only and consistently improve his profitability.
To reach Tom Ross, call 970-871-4205 or email tross@SteamboatToday.com