How can gasoline prices across the Tri-State change by as much as 30 cents in a single day?
In a word: Speedway.
Speedway is the market leader in our area, with more corporate-owned stations here than any other oil company. Market studies show one out of every five gallons pumped around Cincinnati is sold by Speedway.
But we discovered another secret of its success -- a secret that has more to do with real estate than gasoline.
The old model of gas price competition used to be on display at every multi-station corner in Cincinnati. One "mom-and-pop" gas station lowered its price a few pennies, and the other "mom-and-pop" station across the street had to follow suit.
But some stations no longer play this street-level game.
"Speedway goes up, everybody else will go up around them," says Ron McKiddy, a price spotter who volunteers his information to WCPO's John Matarese every week for John's "Cheap Gas Monday" report.
We did a ride-along with McKiddy as he surveyed rising prices on Route 4 in Fairfield last Tuesday, November 17.
"Yesterday, everybody was between $2.35 and $2.38, " says McKiddy. "Now they're $2.65"
And it started with Speedway.
The vast majority of Speedway locations jumped to $2.65 with no corresponding spike in oil prices. Oil futures did go up 3.2 percent the day before, but gas prices in Cincinnati shot up by nearly four times that amount. And oil prices were actually falling while our gas prices were rising that Tuesday.
Ron McKiddy says it's a case of "follow the leader," as gas prices continued to rise by as much as 30 cents a gallon in a flash. "An hour ago, the Shell station was $2.35. They're now $2.65"
The Sunoco next door was still $2.39. McKiddy always takes advantage of an endangered price when he sees one. "Darn right I do," he said as he filled up his tank, saving 26 cents a gallon.
We wanted to know how Speedway is able to change its prices market-wide without fear of what the station across the street is going to do. What we discovered is that in most cases, there is no station across the street.
We used satellite photos and Google Street View to analyze 92 Speedway stations within 50 miles of downtown Cincinnati.
We discovered two thirds of all Speedway locations -- 63 out of 92 -- had no competing gas station directly across the street, right next door, or on the same corner.
McKiddy responded, "well isn't the old saying, 'location, location, location?' "
That's exactly what Speedway said when we called them. The company wouldn't say anything more about its pricing formula, which is a closely guarded secret. A spokesperson said Speedway is proud to be the market leader, and that position is the result of hard work by Speedway's employees.
You have to marvel at Speedway's shrewd decision to locate its stations on high-traffic roadways, but as far away from any competition as possible.
"If Speedway can do that," says McKiddy, "well you hate to say it, but more power to them."
And you can't fault the leader when everyone else follows.
While everyone was rising to $2.65, one Thornton's location on Route 4 was still at $2.36 as of 3:00 p.m. McKiddy predicted, "by five o'clock tonight, I expect them to be $2.65."
Sure enough, just an hour later the same station jumped 29 cents.
Why? Because they can. A change at all the Speedways market-wide gives the little guy permission to follow suit. Station owners make just pennies per gallon in profit, and according to McKiddy, "to make any money, they'll have to go up."
There were still hold-outs, like a Swifty's on Route 4, which often keeps the lower price for a day longer, and reaps the rewards. When we drove by there were lines at every pump.
Speedway not only out-numbers the competition, it out-sells them as well. The Ohio-based company has very loyal customers, thanks to its popular Speedy Rewards card. And the system we described works both ways in the Tri-State. When Speedway lowered it's prices on Nov. 23, the rest of the market had to follow suit.
