State moves to curb Mankato gas war

The law has stepped in to put a stop to a gas war in Mankato.

It was a good deal for drivers — they got their gas at about 20 cents a gallon less than drivers in the rest of the state — but there was just one problem: the government controls the price of gasoline.

Ever since a Fleet Farm opened in April, it and Sam’s Club have been cutting gas prices. But in Minnesota, state law requires gas stations to make at least 8 cents a gallon profit over the wholesale price. The goal is to protect mom-and-pop gasoline stations, many of which have disappeared from the landscape, even with the law in place.

The Mankato Free Press reports the state Department of Commerce has fined Sam’s Club $20,000 for violating the law.

At one point, drivers in Mankato were paying 20-cents a gallon less than the state average.

It was a good run. As of this morning, the two stations are about 7 cents lower ($2.14) than other gas stations in town, but the prices are generally higher now than stations in the Twin Cities.

  • Gary F

    8 cents gross margin, or profit?

    • Tim

      I’d assume gross margin, since net profit would vary from seller to seller depending on their operating costs. But I’m not sure.

      • Gary F

        8 Cents gross margin? Yikes! Even 8% gross margin means you are losing money on every gallon you sell. Better buy more chips, pop and roller hot dogs people.

  • MrE85

    The rationale behind the law is to prevent the Big Boys of the fuel world from selling at a loss to put independent stations out of business. However, as Bob points out, many are going out of business anyway. The margins are pretty thin in that business. Almost all the profits come from the convenience store side, not the fuel itself.

    • Gas and milk — the two commodities with minimum prices set by law.

      • John O.

        You forgot tobacco. Comments from MrE85 coming in 3……2……1..

    • Gary F

      The owner of my corner gas station where I sometimes fill but always get my car fixed tells me that he can’t compete even with that law on the gas side of his business. He also says that with buried gas tanks, he also can’t afford to get out of the gas business because of the costs to stop using the tanks. He says most of the independents were forced out of the gas business 20 years ago when the ethanol mandate came and they by, law, had to have their tanks changed out. He says most owner/operators couldn’t afford the money to upgrade tanks, and couldn’t afford the depreciation schedule on their books.

      • MrE85

        If he’s interested in adding some ethanol blends, he should contact us. There is some grant funding available to partially off-set the cost of new tanks, lines and pumps.

        • Gary F

          He just changed to Minnoco, a local co-op. So I suppose he was in on that stuff.

          • MrE85

            Good. Minnoco was created by the Minnesota Service Station & Convenience Store Association to give independent owners a strong brand of their own and some collective purchasing power. Expect to see more of these soon.

          • I notice the River Country Cooperative Stations (dba Marathons) just went all SuperAmerica. I gather that’s not a sale but a partnership.

          • MrE85

            You are correct. SuperAmerica’s parent company bought the refinery at St. Paul Park from Marathon a couple years ago, this partnership makes sense for River Country.

            Even SA isn’t too big to be swallowed by an even larger company. El Paso-based Western Refining already owned a piece of Northern Tier Energy, SA’s parent company. Now they own a controlling share.

          • Jay T. Berken

            We call this place Jericho’s and now Weise’s. 🙂 They do great service.

      • BJ

        I managed a C – Store in 1995, then the gross profits on gas where maybe, on a really good day, $1000 per day, most of that was if we sold a lot of premium and the ‘spread’ (price dif from one grade to another) was 20 cents. I made more profits on donuts sales. We kept track of the gas we bought and sold, and always ‘sold’ the highest wholesale we could, keeping the ‘cheap’ if we needed to lower the price. Sometime we had ‘cheap’ gas for months.

        • MrE85

          Similar situation in the movie business. I helped manage a 3-screen theater in Indianapolis. Didn’t make a dime off ticket sales, concession sales is where our money was.

  • MrE85

    There’s a lot of competition for the fuel dollar in Mankato. In addition to the stations named in the post, Kwik Trip, Holiday and Hy-Vee all sell fuel in Mankato.

    • Thomas Mercier

      And that’s just the stations essentially along one road.
      Full disclosure: I just window shopped gas prices along that stretch into town the other night with the mother-in-law and filled up at Sam’s which was the cheapest at 2.14.

  • Justin McKinney

    Can someone explain to me why the wholesale price is so much different in different parts of the country? I just drove through South and North Carolina and Virginia, and gas there was $1.81-$1.85 a gallon, depending on where you go. And here in MN, our town (Marshall) is consistently almost a dime higher than any of the surrounding communities, even though we’re one of the largest communities between Sioux Falls and Mankato.

    • MrE85

      Tax rates vary, of course. One reason costs may be higher in Marshall could be a lack completion in the wholesalers who provide stations with their fuel. We have seen similar situations in northern Minnesota.

    • Jack Ungerleider

      In addition to taxes, transport costs can cause a difference in pricing. If you live far enough from a refinery than the cost of getting the gas to you is higher than if you live close to a refinery.

    • Hillary

      Jack’s point about transport costs is spot on. In Minnesota there are a couple refineries, but our fuel prices are in large part influenced by Chicago. Bakken/shale oil is also more expensive to refine into gasoline and diesel than WTI, which is ultimately reflected in the cost we pay at the pump. In the South they’re closer to substantial refinery capacity plus most of the states have lower gas taxes.
      We’re currently in a price lull thanks to both declining international commodity demand and rising domestic supply. It’ll be interesting to see what happens as those factors start shifting.

  • Mike Worcester

    The local co-op where I buy most of my petrol survives thanks mostly to their repair business (including tires, which in farm country can be a big deal), and their convenience store and food sales. Even for them, fuel is a small part of the equation. As an aside, I was amazed that there are still a small number of stations who provide full service. You do find them here and there. Though in Oregon, it’s the law, they *have* to be full service.

    • MrE85

      That’s a law in New Jersey, too.

    • boB from WA

      Define “Full Service”. In OR it is law that an attendant has to fuel your rig. However, they are not required to check the oil, tires, and clean your windshield. Most times they don’t even do it voluntarily because they are trying to pump gas for 6-8 cars at a time, meaning that if you want any of that done, you do it yourself. My opinion is that the law that slows the “service” down ‘cos you got a wait for the attendant to get to your car to put the nozzle, then wait for him/her to remove it, then wait to get your credit/debit card processed or change from your 50. And the tank never gets topped out (“Really, my charge was $46.37?”). Frankly I’d rather buy my gas in WA or ID then have to purchase it in OR.

  • MrE85

    Somewhat related: Don Davis from Forum Communications on how the North Dakota oil boom is felt in Minnesota: