Waiting in line may be the price you pay for cheap gas

April 9, 1999
Web posted at: 9:26 p.m. EDT (2126 GMT)

In this story: Gas discounts fuel lawsuit Supply and demand Prices go up, stores go out of gas business RELATED STORIES, SITES

LOS ANGELES (CNN) -- The price of gasoline in the United States has been creeping up in recent weeks and, according to the government, could rise even more by summer.

Even so, smart consumers can still find bargains, but not at traditional gas stations.

Costco, a discount, members-only retailer, has 43 gas stations nationwide and plans to open 30 more by August. Albertsons, a grocery chain, plans to offer low-priced gas at 600 markets within five years.

Bargain-hunting motorists don't seem to mind waiting in long lines for lower prices at the pumps.

"You come four times a week, you might save five or six dollars a week," said a Los Angeles area motorist filling up at Costco for eight cents a gallon lower than other stations in town.

That savings could come in handy this summer, when a gallon of gasoline will likely cost about a dime more than last summer -- because of rebounding crude oil prices sparked by recent cuts in world production.

The Energy Information Administration said Thursday the average price for regular, self-service gasoline will peak at $1.18 a gallon in May and average $1.13 a gallon over the summer.

Gas discounts fuel lawsuit

The new breed of gas stations -- known as hypermarkets -- save money on both rent and gas because they are not locked into long-term contracts with major oil companies. Instead, they buy cheaper gas from independent refiners.

Discounters call the cheap gas they sell just another convenience for their customers, but some owners of traditional gasoline stations call it something else.

"We've had many new refiners coming into the market and offering prices at very low rates, so I think that these hypermarkets or mass merchandisers are looking at gasoline as a loss leader to attract people into their stores," said Roy Littlefield, executive vice president of the Service Station Dealers of America.

Accusations of selling gasoline below cost to win customers are the focus of a lawsuit filed by seven station owners in Tennessee. The lawsuit alleges Wal-Mart and its gasoline supplier violated the state predatory pricing laws.

Wal-Mart, which sells gas in only 50 of its nearly 3,000 stores, has petitioned to be removed from the lawsuit because, the discounter said, its gas prices are determined by its partner, Murphy Oil, which denies the allegations in the lawsuit.

Prices go up, stores go out of gas business

Mass merchandisers have tried the gas business before, with little success. Sears, Montgomery Ward and others began selling fuel in the 1960s, but stopped when rising oil prices began squeezing profit margins.

With oil prices rising again, Wal-Mart said it has not decided yet if it has a future in selling gas. Albertsons and Costco both said they do.

The recent price jump is being attributed to an expectation of a continuing upward track in crude oil prices fueled by a recent agreement among world producers to reduce production.

Refinery problems in California also have given prices a boost, especially in that state.

The average price for regular self-service gasoline in California peaked at $1.59 a gallon on April 5, which was 49 cents a gallon higher than a year ago, according to the EIA, the statistical arm of the Energy Department.

The agency also predicted crude oil prices will continue to rise, with West Texas intermediate selling at $15.63 per 44-gallon barrel on Thursday expected to move to $18 by the end of the year.

Supply and demand

Gasoline demand this summer is expected to increase by 2 percent over last year because of continued economic growth. And prices, though higher than last year, are still moderate by historic standards, the agency said.

Still, there is plenty of gasoline available, especially in the East, with no supply problems anticipated.

Correspondent Casey Wian and The Associated Press contributed to this report.

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