Price wars are a gas

in Mankato

Low prices cannot be

sustained, retailers say

By GUY PRIEL

Journal Staff Writer

NEW ULM -- New Ulm residents driving to Mankato this past week may have noticed lower prices at the gas pumps there -- as much as 15 cents lower.

However, market analysts say the situation is temporary. Mankato prices should be increasing soon.

An employee at Dick's Texaco on Broadway blamed the lower Mankato prices on a price war .

An employee at Casey's General Store on Broadway in New Ulm said that a new Casey's opened in Mankato last week, sold gas at a lower price, and the other retailers followed suit.

"There are a lot of factors that come into play when it comes to gas prices," Groebner's Amoco Manager Scott Trebelhorn said. "There is no simple answer. One explanation is that a new location opened in Mankato."

When a new station opens, it is typical for it to drive the bottom out in an attempt to grab a certain share of the market, which then forces the competition to meet the price, Trebelhorn said.

"This is a trend that cannot persist for long, though, because they cannot survive with what they are charging," Trebelhorn said. "This will result in a short-term expense in the long run. Obviously, something like this does affect outer communities."

The prices charged at the pump, which is $1.33 to $1.25 in New Ulm, and $1.34 in Gaylord, Gibbon, Winthrop and Lafayette, are fairly similar to what is charged in the Twin Cities, Trebelhorn said.

"There are many market forces in place, but we are where we should be for prices," he said. "They should be higher than in the Twin Cities, because of increased transportation costs to get gas delivered."

Minnesota law requires that any product sold at retail must be sold at least 10 percent over the cost paid by the company, unless there are other market forces that indicate otherwise, he said.

"There is a differential in place in Mankato, and it is alarming. Consumers are not getting gouged at the pump," Trebelhorn said. "But the market forces in Mankato don't follow established trends. This is a short-term phenomenon."

Market studies conducted over the past five years indicate that Mankato tends to be a stronger force when it comes to gas prices, because they tend to charge more than New Ulm, and other outlying communities.

"We monitor prices closely and always chart the course," Trebelhorn said. "This is merely a blip in the scale. Gasoline is like air, we need it to live, and we will pay what we need to get it. But is driving to Mankato to save 15 cents a gallon worth it in the long run?"

There is no regulation in gas prices set at the state level because Minnesota is a free market. All prices paid at the pump are established by the retailers based upon initial cost, Minnesota Division of Weights and Measurements spokesperson Rick Johnson said.

"Under state law, though, retailers cannot sell below their cost in an attempt to force their competition out of business," he said. "Predatory pricing is difficult to enforce and falls under the jurisdiction of the attorney general."

The Mankato situation is not predatory pricing, because all retailers are charging the same price, Johnson said.

Because of the pricing wars, an employee at Sinclair in Mankato refused to disclose the actual price of gas at the pump, but said it is at least 19 cents cheaper than in New Ulm.

The manager of SuperAmerica in Mankato refused to comment on the pricing, but said that prices have already started to make an upward turn.

The manager of Hilltop Amoco in Mankato, where the price tends to be higher than elsewhere in town, said that the price Tuesday morning was $1.16 per gallon, but that QuickTrip was already at $1.29 per gallon.

"A lot can happen, and we hope everyone enjoyed the little ride," the Amoco manager said. "But once it is all said and done, the profits were only about 6 cents per gallon at the lower rate. Companies can't afford that for long."

22¢½ØU22styl €ÿÿ¢¾¬