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Little guys the new losers in local gas price competition? |
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Saturday, 27 December 2008 |
 Vons card-holding members are saving 10 cents per gallon at the gas station for every $100 of groceries purchased, but these patrons may be getting the cheaper fuel prices by paying higher prices for groceries. File photo By Mike Bodine
Register Staff
12-25-2008 Having dropped nearly $2 a gallon in six months, the gas prices in Bishop are at their lowest since 2004, now comparable to fuel prices in Los Angeles or Reno at under the $2 mark.
At the newest station in town, the Vons Fueling Station, gas is literally being given away to some customers through a member-rewards program.
While customers have reported excitement at getting discounted fuel during these tough financial times, it has also been reported that Vons’ gas “rewards” may be to the detriment of smaller, locally run stations, other grocery stores and possible these Vons members and patrons.
The member-reward program involves certain Safeway/Vons fueling stations nationwide, the new station in Bishop included, offering discounts on fuel for card-holding members. The deal is a 10-cent per gallon discount for every $100 spent in the grocery store. This deal is not promotional; rather customers will be allowed to accumulate savings every three months. Members can get an additional savings at the pump by using their Safeway/Vons Club card as well.
There have been reports of members paying only a penny a gallon for gas after the accumulated savings, and some professionals who frequent Vons regularly are paying nothing for fuel.
These same patrons reporting savings on gas are also reporting spikes in grocery prices at Vons.
Cecil Patrick, kitchen manager and cook for the California Institute of Technology in Big Pine, said Tuesday that prices on some staples such as milk have stayed consistent. But, items he also purchases frequently such as beef, bacon and salad mix, “have definitely not gone down.”
Patrick added that he has seen a steady rise in his overall grocery bill, and on individual items in the last year.
Patrick was the only professional interviewed for this article who was willing to be identified. Owners, operators and managers of fueling stations and grocery stores in Bishop and surrounding communities all explained that they did not want to be quoted as they did not want to sound like they were condemning Vons for having such a clever business model.
Some station representatives also spoke of the perception held by the public that local fuel providers are gouging consumers with high prices. However, more than one of them said that their stations have been called “survivable” or at best a solid tax-collector for the state by station corporate executives. California has the highest per gallon tax of any state, according to www.californiagasprices.com, at $0.63 per gallon for gas and $0.72 for diesel.
It has been reported that local stations do just enough volume to justify their existence, but hardly enough to keep up with constant, mandated upgrades of things like hoses and nozzles. It has also been reported that a brand-name station is not reimbursed for upgrades by its corporate namesake. The station is allowed to use the name and its products, including the advertised, higher-quality gasoline with cleaning additives, but little else.
However, fueling stations and grocery stores are not the only ones to suggest that this gas-reward model may hurt the consumer in the long financial picture, as there are reports of suspicion and apprehension from the general public as to Vons’ intentions.
Corporate Safeway/Vons representatives were not available for comment at the time of this article, nor were Bishop Vons store managers able to comment on the motive behind the gas-reward savings or their impact on the community, but some of the competing fueling stations interviewed for this story suggest Vons’ strategy includes raising grocery prices to such a high rate that it can still make a profit giving fuel away.
For the scope of this article, it is impossible to determine how the profit margin works for Vons or what logarithm is used to determine how a profit is made, but it has been argued that consumers may actually be paying more for the $100 in groceries than they are saving with the 10 cents a gallon discount.
For other local stations to stay competitive they must drop their prices to near-wholesale levels. According to information provided by a local professional, the wholesale prices for unbranded gasoline on Monday morning in Los Angeles was $1.39 a gallon. Add to this price, state and federal tax, freight and sales tax, and the price is an even $2 a gallon – this before a profit is added.
There are other factors such as when the fuel was bought, to when it gets shipped and when it is sold retail, but this information shows that local fuel stations are operating at a loss or close to it.
Some professionals have pointed the finger at the Bishop City Council for not doing something to curtail Vons’ gas-savings plan.
However, the council’s job is to agree on the conceptual design and building code requirements, but it is free enterprise as far as prices or promotions go.
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Last Updated ( Monday, 12 January 2009 )
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