Gasoline Price Changes - Federal Trade Commission

GASOLINE PRICE CHANGES:
an influx of high-volume discount stations like ARCO and Beacon in the late 1990s, 12 and
hypermarkets appear to have begun entering the region in 2001. 13 One of the hypermarkets that
entered Redding was Safeway. When supermarkets, such as Safeway, sell gasoline, they
typically sell between 150,000 and 300,000 gallons per site, per month. This high volume of
sales contrasts with that of the average traditional service station, which historically has sold
approximately 60,000 gallons of gasoline a month. 14 For example, of the approximately 25 gas
stations in the vicinity of Siskiyou County, the average station sells only about 50,000 gallons
per month, and the county’s highest-volume stations sell only 150,000 gallons per month. 15
Another illustration of the effect of hypermarket entry involves the reaction of nearby gas
stations when a Sam’s Club in Louisville, Kentucky, began selling gasoline. After the
hypermarket opened, stations in closest proximity to Sam’s lowered gasoline prices below the
levels maintained by other, more distant stations. For example, following Sam’s entry, a BP
station closest to the hypermarket – less than a tenth of a mile away – reduced its prices by $0.02
to $0.03 per gallon, relative to the prices charged by more distant BP stations. 16
2. Retail gasoline sales reflect four important national trends.
In the past three decades, four important national trends have emerged in sales of retail
gasoline. First, traditional gasoline-pump-and-repair-bay outlets have been a dwindling part of
the industry. Specialty retailers now handle the lion’s share of repair services, such as
transmission and brake maintenance, oil changes, and tire sales, that traditional gas stations
formerly provided. Second, as early as the 1980s, branded gasoline retailers began to shift
toward a convenience store format, with the sale of food, beverages, and other conveniences
supplanting the provision of repair and specialty automotive products and services.
Third, independent (that is, not owned by a refiner) gasoline/convenience stores – such as
RaceTrac, Sheetz, QuikTrip, and Wawa – began entering the market. These independent stores
typically feature large convenience stores with multiple fuel islands and multiple-product
dispensers. Some refer to these retailers as “pumpers” because of their high-volume fuel sales.
With the ability to sell significantly higher gasoline volumes and additional in-store revenue
streams, many of the large independent retailers became high-volume, low-price gasoline
retailers and successfully captured significant retail market share from traditional outlets. 17
Branded gasoline retailers responded by expanding their own convenience store offerings, such
as Mobil’s On-The-Run, and replacing any outdated fuel pumps with higher-volume, multipleproduct
dispensers, thus, in some instances becoming pumper stations. By 1999, the latest date
for which data are available, branded and independent convenience store and pumper stations
accounted for almost 67 percent of the volume of U.S. retail gasoline sales. 18 On average, the
largest convenience store companies – those with over 200 outlets – sell approximately 120,000
gallons of fuel per site, per month, as compared with the 60,000 gallons a traditional gas station
typically sells. 19
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FEDERAL TRADE COMMISSION, JUNE 2005