Grand Forks gasoline prices tend to be higher than prices at gas stations about 80 miles south in Fargo -- and some local motorists aren't very happy about it.
"They basically holler at the employees," said a worker at a Grand Forks gas station who declined to be identified. "We have no control over it. I don't even understand why we're more expensive than Fargo. They just take it out on us because we work here."
The average price of a gallon of regular unleaded was $2.21 Thursday in Fargo, more than 30 cents cheaper than the Grand Forks average of $2.53, according to survey of gas stations by the Oil Price Information Service.
Prices posted to the gasbuddy.com Web site by consumers also showed regular unleaded selling from $2.09 to $2.12 Thursday in Fargo, while Grand Forks prices were locked at $2.46.
Why?
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Mike Rud, president of the Bismarck-based North Dakota Petroleum Marketers Association, said Grand Forks' higher prices are not a case of price-fixing or collusion by local gas station operators. Quite the opposite, actually.
Rud said the reason for the disparity in gas prices between the two markets over the past decade is cutthroat competition between gas stations in Fargo that has forced prices and profit margins down lower than what Grand Forks stations are charging.
The Fargo area recently was ranked as one of the 15 least profitable markets in the nation to sell gasoline by the Oil Information Service with a profit margin of less than 2 cents per gallon.
"They are operating on a much thinner margin," Rud said. "They have made a decision that they aren't going to give any ground and they are going to match the competition's prices. They figure they can run their businesses in a different fashion and make ends meet."
Rud said to fault gas station operators in other cities in the state like Grand Forks for not slashing prices like Fargo stations have doesn't make sense.
Price wars tend to be more competitive in cities, often leaving a disparity between what drivers pay in rural areas, midsize cities and larger cities.
But prices in some nearby small Minnesota cities also are cheaper than in Grand Forks.
The Ampride/Cenex gas station in Crookston was selling regular unleaded for $2.19 a gallon Thursday -- almost 30 cents less than what some stations in Grand Forks were charging.
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"That's a darn good question," said Wayne Melbye, owner of the Ampride/Cenex station when asked about the disparity. "Normally, we're pretty comparable to Grand Forks, within 2 to 5 cents."
Melbye said he usually aims for a 12 cent profit margin per gallon, before credit card processing fees are factored in.
He said he watches his competition and adjusts his prices accordingly. He said one reason two gas stations in the same area may have different prices sometimes depends on what the wholesale price of fuel was when they purchased it.
Many gas stations that are part of chains don't set their prices directly, but instead receive phone calls instructing them when they should adjust prices.
The price of crude oil accounts for about 75 percent of unleaded gasoline prices, with refining costs, taxes, distribution and marketing making up the rest, according to the U.S. Energy Information Administration. The rise of gas prices to the $4 range earlier this year was blamed in part on investors purchasing crude oil futures, driving up oil prices.
Transportation costs generally are higher for gas stations in more remote areas.
Rud said sporadic supply shortages at the Magellan pipeline terminal in Grand Forks, especially for diesel fuel, likely hasn't helped local gas stations, either.
"Anytime you have to go somewhere to transport your product, you're going to have to factor that in," Rud said. "That's part of your cost of doing business."
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Grand Forks City Council President Hal Gershman said he has heard the complaints that Grand Forks has more expensive gas than Fargo. But he said the city has no plans to look into the matter.
"I don't see where that is our business," Gershman said. "That's private enterprise. I don't think the city should get involved in telling retailers what they should charge. That's controlled by our free market system."
Schuster covers business. Reach him at (701) 780-1107; (800) 477-6572, ext. 107; or send e-mail to rschuster@gfherald.com . Read his business blog at www.areavoices.com/bizbuzz .
