The Speedway Effect
The Leader Herald
JOHSTOWN – When Zee Zulfi, owner of ZZ Petroleum, first began building his new gas station at the corner of East Fulton Street and Elwood Avenue, he was always puzzled by why gas cost more in Gloversville than they did at his other gas station in Malta.
“Gloversville always used to be about 10 to 15 cents more than Malta, and I always wondered why it was so much different because it only costs probably a couple of cents more to deliver it,” Zulfi said. “Obviously it should be a little [more] because it costs a little more.”
Since then, things have changed. On Thursday Zulfi was selling a gallon of unleaded gasoline for $2.17 per gallon in Gloversville and $2.25 per gallon in Malta.
“I?opened up just recently, and that’s the reason I have to sell to the comeptition. If I don’t, I won’t make it. It’s a really tight market. There’s nobody making any money,” he said.
A gasoline price map on www.albany.com on Friday showed that over the preceding 48 hours gasoline prices in Fulton County ranged from $2.08 to $2.17 per gallon, while prices in Montgomery County ranged from $2.18 to $2.28 per gallon, prices in Schenectady and Saratoga County ranged from $2.14 to $2.25 per gallon and prices in Albany County were $2.19 to $2.29 per gallon.
Gasoline station owners in Fulton County are attributing the low prices locally to an aggressive price competition caused by Speedway’s acquisition of the former Hess Station on Route 30 in Johnstown.
Maria D’Amelia, Public Relations Specialist for
Stewart’s Shops Corp., said her company has seen aggressive price wars started by Speedway in the past. She said Speedway often aims at specific markets, but usually only maintains low prices for a few months before raises prices nearer to what gas station’s would normally charge per gallon.
“Aggressive competion, that’s really what we’re tracing this back to,” D’Amelia said of the low prices in Fulton County. “The Johnstown-Gloversville area we can say is a particularly over competitive area right now.”
In Mayfield, Fuel and Food owner Lou Stutzke, also attributed the low gas prices to Speedway. He said over his 19 years in the gas station business, he’s seen other price wars, but they usually only last three to four months. He said he noticed Speedway began dragging down the prices of all of the gas stations in August.
“My customers were coming in and telling me about the price,” Stutzke said.
Stutzke said large corporate gas station chains like Speedway can afford to sell gasoline at no profit or nearly no profit in order to establish market share, while smaller dealers like himself are forced to cut back on hours for employees or even maintenance of his store until the price war ends.
“We’ve got to tighten our belts,” Stutzke said.
D’Amelia said the gasoline market experts at Stewarts Shops do not believe Speedway’s pricing strategy is sustainable. She said Stewarts Shops believes gasoline, as of Thursday, should have been selling for approximately $2.20 per gallon in the Johnstown and Gloversville area.
“It’s not a true, fair pricing,” she said of Speedway’s strategy. “It can be a short-term gain, but in the long-run it can hurt profits.”?
Zulfi said he believes Speedway is responsible for most of the price compeition locally, but he thinks the low price was actually set by a Cumberland Farms in Gloversville. Zulfi said he has experience with direct competition with Speedway in the past and he thinks Speedway will raise its price when other gas stations do the same.
“I never see Speedway go below their competition, so if the competition goes up, they will go up. If Cumberland Farms goes up a penny, Speedway will go up a penny,” he said.
Stefanie Griffith, a communications manager for Marathon Petroleum, which owns Speedway, would not comment on whether it’s Speedway’s policy to always match it’s lower cost competitor in a gasoline market. She sent a written statement to The Leader-Herald by email: “Gasoline is one of the most competitively priced products you will find as the price is displayed in a way that consumers can drive by and see the current price at any time and then decide where they will make their purchase. This typically drives retailers to compete by lowering prices to attract customers. Speedway is just one of several competitors in the market and will change their price to address the local competition. The price changes are indicative of how competitive the market is.”
Fulton County Treasurer Terry Blodgett said for first six months of 2015, Fulton County had the largest decrease in sales tax receipts for motor fuels of any county in New York state, and yet total sales tax receipts for the county still rose. For the third quarter, sales tax receipts in Fulton County were up year-over-year by $64,229.
“I’m wondering how that’s even possible,” Blodgett said. “Our theory is that maybe if people are paying less for gas, they have more discretionary income they can spend on other things.”