News 18 Investigates: Gas Prices Part 2

LAFAYETTE, Ind. (WLFI) – There’s nothing that quite fuels conversation as gas prices, especially when they go up, by a lot, all at once.

In Part 2, we continue our exclusive seven-month long investigation of gas prices in Lafayette and around the viewing area.

In Part 1, we revealed the cheapest and most expensive stations that we tracked and showed that, contrary to what you may think, the average difference between stations is usually a few pennies.

In Part 2, we reveal the other surprising find of our study, Lafayette gas prices are the most volatile of the entire area.

Gas prices seem to follow an unbreakable pattern: drop a couple cents here, drop a couple cents there, drop, drop, bang — an increase of 30 cents, usually right when you need gas the most.

“It’s just everybody looking at the market and playing chicken and who’s going to raise first,” said Scot Imus, executive director of the Indiana Petroleum Marketers & Convenience Store Association.

During the seven months that News 18 investigated, prices jumped 21 times at all Lafayette and West Lafayette stations we tracked, an average of every 10 days.

While some other places come close, no other city spikes as frequently.

Lebanon, Monticello and Rensselaer each had 15 or fewer increases in the same time period, an average of more than two weeks per jump.

“There’s no rhyme or reason for it, outside of getting back to supply and demand,” said Rick McClure, executive vice president of McClure Oil Corporation, which owns 36 stations around Indiana.

“Nobody’s paid to hold inventory,” adds Purdue Agriculture Economist Wally Tyner.

For Lafayette-area drivers who aren’t careful, there’s more bad news. Nine of 10 stations tracked saw average spikes of more than 28 cents, with the highest increase at the West Lafayette Admiral at 36.2 cents.

It was the exact opposite at the other 10 stations we tracked where only one station saw a spike that high, the Murphy USA in Crawfordsville. Six stations averaged less than 20 cents per jump including the Rensselaer Family Express at just 11.8 cents. That’s the same gas station that in Part 1 had the highest average daily pump price.

The reason, once again, is likely competition.

“Where you have the most volatility, you also have a lot of below-cost selling. Those big jumps is because they were selling below cost,” said Imus.

In other words, stations are losing pennies for every gallon pumped by drivers all in an effort to keep volume up and traffic flowing into the convenience store. Because often, while drivers keep watching prices drop bit by bit, gas station owners are watching wholesale prices rise.

“We do what we have to do,” said McClure.

“If they feel you’re consistently high, they will not frequent your store. Once you’ve lost the customer in that regard, it’s hard to get them back,” adds Brian Johnson, the vice president of finance for Casey’s General Store, which owns more than 1,700 stores in 14 states across the Midwest.

While the common complaint when stations have a big jump is price gouging, by state law that’s impossible unless the governor declares a state of emergency. Even then, it’s only gouging if the jump cannot be explained by market factors, like a refinery outage or an increase in the price of crude oil.

Those factors are watched at least daily by Tom Bodin, the CFO in the Indiana Attorney General’s Office. Plus, for gouging to occur the pump price must grossly exceed the price in the previous seven days.

“When we have a major event or when we have a major energy event, that is when we want to have all hands on duty. We are going to be monitoring these prices on a moment-by-moment basis,” said Bodin.

The other common complaint by drivers is collusion, especially on a day in our study period like Dec. 27 or Feb. 22 when all stations seemed to jump at once.

“That’s not collusion if they see it on the street. If you see it by the sign, that’s not collusion,” said Bodin. “If you have your competitor give you a call, ‘Hey, at 10:15, I’m going to increase my price 12 cents, you want to do the same thing?’ That’s collusion. And that’s where we have had a hard time finding evidence for it.”

“It’s not that they are at this exorbitant high level,” adds Imus. “They are at a level they should have been at all along, but the competitive marketplace prevented them as they took price increases on wholesale prices.”

In other words, Lafayette’s volatility is a good thing for drivers, as long as you can time it out right and fill up before prices jump.

The numbers in our investigation bear that out.

Almost half of the time, 47 percent, one or more Lafayette-area stations had the lowest price of the 20 stations we tracked. The Admiral station with the largest average spike, also came in as the Lafayette-area station with the most days of having the lowest price, tied with the Super Test on Sagamore Parkway and State Road 38. Both had the lowest price 16 percent of the time, or one out of every six days.

But it matters where you stop because more than one-third of the time, 38 percent, one or more stations in the greater Lafayette area had the highest price in the entire region, sometimes on the same day as another station in the city had the region’s best price.

“Consumers are so close to this commodity, they feel this volatility unlike any other product that they are purchasing,” said Bodin.

As for our results outside of Lafayette and West Lafayette, the Family Express in Monticello had the most days of having the lowest price at 23 percent of the time. The Crawfordsville Murphy USA was the only other one with the lowest price more often than the two Lafayette-area stations.

Comparing cities, Greater Lafayette’s 47-percent figure represented the city most likely to have the regions best price. Next came Monticello at 29 percent, Crawfordsville with 21 percent, Indianapolis with eight percent and Lebanon with seven percent. Rensselaer’s Family Express never had the region’s lowest price. For these calculations, multiple cities could get credit for having the region’s lowest price for the day.

On the other end, Indianapolis was the city most likely to have the region’s highest price at 49 percent. Greater Lafayette’s 38 percent was next, followed by Rensselaer with 44 percent, Monticello with 16 percent, Crawfordsville with 11 percent and Lebanon with six percent. Again, multiple cities could get credit for having the region’s highest price for the day.

“That volatility they are seeing at the pump is the same volatility we’re dealing with when we buy it,” said Johnson.

So, buyer beware.

Volatility means cheap prices can be found at times. But with average increases of 30 cents, and some as high as 48 cents, if you’re a day late you’ll be much more than a dollar short.

In Part 3, we’re going to try to help you put some cash back in your wallet. We’re going to give you the best tips from the experts to save money on fuel, reveal if there’s a best day to buy gas, plus forecast pump prices for the summer.

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