Pain at the pump: Residents wonder why NWI gas is highest in state

2012-05-12T21:30:00Z 2012-05-14T17:00:07Z Pain at the pump: Residents wonder why NWI gas is highest in stateBy Lindsay Machak lindsay.machak@nwi.com, (219) 933-3246 nwitimes.com

Barbara Kotas can remember when a night on the town cost her 50 cents a gallon in gasoline.

Kotas, 68, of Highland, is dismayed with the rising cost to fill up her Ford Explorer.

Kotas is among many residents in Lake and Porter counties complaining about the pain at the pump.

Northwest Indiana has the state's highest average price for a gallon of unleaded fuel, according to www.fuelgaugereport.com.

The website, the Daily Fuel Gauge Report, compiles daily gas price information by AAA and the Oil Price Information Service and found that residents of Northwest Indiana are paying more per gallon than any other area in the state.

On Wednesday, gas in the Gary area was hovering around $3.91 per unleaded gallon, which was about 10 cents more than the state average, according to the website.

The highest average price the state has ever seen for regular gas was $4.25 last May. Northwest Indiana's highest price on average was $4.36 on March 31.

Kotas said she doesn't understand why gas prices continue to rise compared to the good old days when it was only $20 for her to fill her tank.

Scot Imus, executive director of the Indiana Petroleum Marketers & Convenience Store Association, said many consumers might be baffled by the forces driving up gas prices.

The owners of the gas stations are actually the people who set the prices at the pumps, but they are not the driving force behind the squeeze, he said.

“Rarely do retailers get over the break-even stance,” he said.

Gas stations don't make much profit, if any, on customers fueling up, he said.

The gas is used to woo customers into the convenience store to buy items like pop, chips and candy, which is where the retailers make a profit, Imus said. But high gas prices don't benefit the retailer either.

“When prices are high you have consumers less likely to buy those items,” he said.

Some stations can make a profit off of gas sales, but it's rare in Northwest Indiana because the competition to bring in customers is fierce, he said.

“There's not a lot of loyalty when it comes to buying gas,” he said. “People will shop around.”

Which brings retailers to ask themselves, “How low can you go?”

Tom Collins Jr. is vice president of Luke Oil. The Hobart-based company has more than 20 locations in Northwest Indiana. Prices for those stations are regulated by the cost of gas from oil companies and pure competition, he said.

“The high total number of gas stations in (Northwest) Indiana creates intense competition on fuel pricing, which benefits the consumer,” he said in a statement.

Purchasing gas from the oil companies also drives competition in Northwest Indiana because there are so many places where retailers can buy supply from, Imus said.

Branded gas stations are obligated to supply the consumer with gas bought from the brand's designated fuel supplier, which sometimes isn't the cheapest option, Imus said.

Independent gas stations often have a lower price at the pump because they can buy their supply from any supplier.

“You can shop around for the best price,” he said. “You're pretty free to go out and find fuel where ever you can find it.”

Although competition and by-the-barrel pricing affects the consumer, there are other factors that contribute to the pain at the pump.

Taxes and other fees are also something that a consumer might not directly view when checking a sign outside the gas station before filling up.

"Cook County and the city of Chicago have additional local taxes that make Indiana prices more attractive," Collins said.

There are also hidden costs for retailers when a consumer makes a credit card purchase at the pump. Retailers are hit with fees from the credit companies each time a customer swipes a card at the pump, Imus said.

The credit card company makes anywhere between 2 and 3-percent of the total sale, which isn't good for the retailer because the customer gets the same amount of gas, but the gas costs more for the station, he said.

“As prices go up, more and more customers rely on credit cards to buy gasoline,” he said.

Another driving force of high local prices is that  retailers in Lake and Porter counties are required by the government to use reformulated fuel.

While the fuel might burn cleaner with fewer emissions, it costs more, Collins said.

But regardless of why they are high, people still have to get to where they are going, Angelia Cross said.

Cross, 34, of Gary, said she's unhappy with the high prices she's seen lately.

“Sometimes, though, I don't have a choice but to pay because I've got to go to work,” she said.

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