Who’s driving?

It's Friday morning, and super unleaded fuel is $2.72 per gallon at the Casey's on U.S. Highway 34 in Creston. At the Casey's on Highway 25 in Greenfield, it's $2.70. At Taygold Service Station in Clearfield, it's $2.61.

On any given day, a quick survey like the one above will show that not all gas prices in southwest Iowa are the same. But why are they different from town to town?

The answer, according to those in the business, is a combination of ever-changing wholesale fuel prices and, of course, local competition.

Casey’s General Stores, which owns six gas stations in Creston alone, has a company-wide policy to never be undersold on gasoline, said Brian Johnson, Casey’s vice president of finance.

Since many Casey’s stores only refill their inventory every five or six days, Johnson said that gives the ever-fluctuating gas market a lot of time to change. Competitors may end up with cheaper or more expensive fuel because of the timing of their shipments, even though they often receive shipments from the same terminals as the competition.

Johnson said store managers check competitors’ prices every day on their drive to work and their bank runs, constantly listening to what customers are saying to keep informed on the competition.

While there is no set margin for any store, the corporation has an overall goal of 16.7 cents per gallon, Johnson said. A margin is what is added to the wholesale price plus the gas tax. To reach this goal would mean all of its stores combine to make 16.7 cents above the wholesale price plus the gas tax. Some of this margin, about 7 percent at the current $2.72 rate, then goes toward credit card processing fees. More of it can go toward repairs and other related costs.

Competition is a major variable, he said, because independently owned stores may keep a much lower margin, like 10 cents a gallon. That might explain why prices are different at a Casey’s in another town, he said.

“We compete against single operators that have different philosophies,” he said. “If they’re cheaper than Creston, my hunch is there’s a competitor that they’re competing with.”

Even if Casey’s is the only store in town, that doesn’t mean there isn’t competition. Johnson said people likely commute to work in another city where they will have another chance to buy gas. The prices must thus remain competitive. But Johnson said Casey’s will not sell gas for a loss unless there’s “a crazy gas war going on.”

Darin Schlapia is one of those “single operators” that Casey’s competes with. As the branch manager at Creston’s Farmers Cooperative, Schlapia gets his fuel from CHS Inc. The two main terminals his gas comes from, he said, are in Des Moines and Council Bluffs.

Schlapia said prices in Creston often run about 10 cents a gallon higher than Des Moines stations, but he said it also costs about that much more to transport it to Creston from the Des Moines terminal.

Setting prices in Creston, he said, is a balance to keep the price fair while remaining competitive with other gas stations in town and still having enough margin to cover related expenses.

“We don’t want to jab our consumers, and we do want to make a little money,” he said.

But Schlapia said pure profit isn’t necessarily the end goal at Farmer’s Cooperative. Through offering ethanol blends not available at most other stations, he said the co-op has a mission to support those who produce those products, as well as to simply provide its trucks and other customers with quality gasoline.

“Those pumps out there – that’s for our customers, and that isn’t out to make money,” he said. “That’s for our customers to use so we’ve got a good supply of fuel available.”

Johnson agrees that gas is not a high-profit product. When percentages are compared, Casey’s doesn’t make much money from gasoline sales. But it does bring people through the doors.

“Gas is not a loss-leader, it’s a thin-margin product,” he said. “It’s a destination item. It’s how you attract the customers to come to your store.”

Johnson said fuel makes up 66 percent of Casey’s revenue but only 24 percent of its gross profit. Prepared foods make up 8 percent of revenue but 32 percent of gross profit.

Robert Schlapia, Darin’s uncle, owns the Diagonal-based R K Fuels and sets gas prices for Jerry’s Sinclair in Diagonal. He agreed that gas prices are what bring in customers.

In a town as small as Diagonal, Robert said he keeps them low to keep drawing customers who otherwise commute to Creston or Mount Ayr.

“I’ve got to be just a little lower so people from Creston come in and get their pop or their beer in Diagonal,” he said. “That’s kind of the reason we stay a little lower, to keep our local trade here.”

In the industry, Robert is known as a “jobber,” which means he hauls fuel directly from the terminal. Robert monitors fuel prices and travels to terminals in Council Bluffs, Omaha, Des Moines or Kansas City to pick up the fuel with the lowest wholesale price, which he then distributes to a variety of locations. This morning, his price at Jerry’s Sinclair was $2.52 for a gallon of super unleaded gasoline — one of the lowest prices in the Creston News Advertiser coverage area.

So who leads with gas prices? And why doesn’t one station just move down a penny to sell more gas? In the end, Johnson said, it’s not that simple.

“Generally speaking, we’re all following each other,” he said. “We can try to lead it down, or (they) can try to lead it down (but if) you lead it down and they follow you down, you’ve just hurt your margins and not gained any business.”