Low gas prices fuel debate

One wholesaler pays retail at Fred Meyer and still turns a profit

Posted: Monday, February 17, 2003

Fuel prices at Fred Meyer last week were so low that Brian Olson, a manager for fuel wholesaler Delta Western, bought gas there to sell to other stations.

"I could not purchase a block of product at current rates in Washington, transport it to Alaska, meet Fred Meyer's price, and realize a return on my investment," said Olson, who sells gas to Mendenhall Valley Tesoro and several other local stations.

"I will realize a return on (the Fred Meyer) purchase, on a resale level," he said.

Though Fred Meyer cannot supply enough fuel for Olson to fill all of his orders - he has a capacity for 3.6 million gallons - he filled his fuel truck at Fred Meyer as a symbolic gesture to bring attention to the Fred Meyer's low rates, which are well below most stations in town.

Fred Meyer, which opened its gas station in Juneau in August, is selling its regular unleaded fuel at $1.549 per gallon. The price drops 3 cents for customers who sign up for a free FM Stop and Save card.

Taku Fleet, a self-service station in Lemon Creek, is the only other station in town selling regular unleaded for $1.549.

The highest-priced stations in town, the Valley and Downtown Tesoro stations and Mike's Airport Express, sell regular unleaded gas for $1.719.

"Our goal is to stay competitive with the lowest gas prices in town with our advertised price, and we do that," said Rob Boley, a Fred Meyer spokesman based in Oregon.

Fred Meyer fuel is the same quality of any other fuel station in town, Boley said.

"We purchase fuel only from major refineries. Our equipment is new and state of the art," he said.

The gas station at Fred Meyer is considered a department of the larger store. Boley would not say whether the store is selling fuel for less than its wholesale cost, but said the store as a whole is making a profit.

Fred Meyer has no policy against a local distributor filling its tanks at the store, Boley said.

"Our job is to take care of our customers and anyone who wants to buy gas or diesel from our retail, we're here for them," he said. "We have a lot of large-quantity customers. We're going to sell to anyone as long as we have product."

Petro Marine, a fuel wholesaler, supplies fuel to Fred Meyer and Williams Express, said Dick Bevens, the Petro Marine terminal manager. Because the two stations receive fuel from the same source, he cannot explain how Fred Meyer sells gas for 7 cents less per gallon than Williams Express.

"If we sent a barge down from Juneau today, bought the fuel at the Seattle rack price, transported it to Juneau, it would cost us more than what Fred's sells it for here in Juneau," Bevens said.

Some local fuel suppliers and service stations speculate Fred Meyer is selling fuel at a loss to bring in customers.

"If I was to sell my unleaded regular at the price Fred's is currently charging, I would be losing 5 cents a gallon, at least," said Richard Godfrey, owner of the Mendenhall Valley Tesoro.

"Their pricing does not make economic sense," he said. "... Fred's should be the lowest-price people in town, but 17 cents - nah."

Fred Meyer's corporate spokesman would not comment on how the company keeps it costs low. He also would not say whether the company set retail prices below wholesale to attract customers.

Taku Fleet, the unstaffed station operated by Taku Oil Sales, another fuel wholesaler, can sell its fuel at $1.549 per gallon because of its low overhead costs, said Jeff Hansen, the company's manager.

"I don't have people to pay at that place, and a lot of the overhead that the other ones do, so I should be the lowest price," he said.

While the low rates may temporarily benefit Juneau motorists, service station owners and fuel wholesalers warned of the long-term effects of the low prices in the community.

"It's wonderful that the motoring public is realizing a benefit from this phenomenon," said Olsen. "However, it comes with an incredible risk of losing long-time community stations and the employees making a living there."

Prices at the pump

Capital Service - $1.699

DeHart's - $1.619

Douglas Depot - $1.599

Fisherman's Bend - $1.599

Fred Meyer - $1.549

Mike's Airport Express - $1.719

Petro Express - $1.579

Taku Fleet - $1.549

Tesoro downtown - $1.719

Tesoro Valley - $1.719

Williams Express - $1.619

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