Retailers Drive Gasoline Prices

At midnight every night, the price of gasoline changes, and Northwest Oil Co. of Fayetteville shifts gears to get fuel to the 50 convenience stores it serves.

But those daily changes, which have been as much as 10 cents per gallon, don’t show up at the pump the next day and may never be passed on to motorists.

“Retail gasoline prices don’t have anything to do with wholesale costs,” said Butch Robertson, president of Northwest Oil. “They don’t go hand in hand. That’s what makes the gasoline business so screwy.

“The main reason is that you always have inventory in the ground in storage, and that product may have been purchased three days ago at a very different price than the price today. This is a very competitive business, and competition is what drives the retail market prices.”

In Northwest Arkansas, Wal-Mart Stores Inc. and E-Z Mart Stores Inc. set the low end of the price curve.

E-Z Mart, based in Texarkana, Texas, has price-lowering clout because of its size, with more than 400 stores in five states. Murphy Oil Co. of El Dorado, which supplies gasoline to Wal-Mart Supercenter stations, has a refinery so it can bypass wholesale distributors to keep prices down.

“It goes from the well to the pump,” Robertson said.

To stay competitive, other stores match those prices and squeeze profit out of the supply chain. So wholesalers like Northwest Oil, which delivers 3 million gallons of fuel a month, have to run lean to make a profit.

Crude Awakening

Northwest Oil was founded in 1972 by George Williams and Joe Cogdale. In 2002, Williams sold it to Robertson and his partners, Bob and Jeff Gaddy of Fayetteville.

The private company brought in about $60 million in sales in 2004, up from $45 million a couple of years ago, Robertson said.

Robertson owned his own oil company from 1977 to 1991, after serving as vice president of Stout Petroleum Co. of Fayetteville from 1972 to 1977.

Robertson tried to retire, but he played so much golf it became a chore to him. It was a crude awakening of sorts, so he’s back in the oil business.

In addition to being a wholesale distributor of gasoline and diesel fuel, Northwest Oil also owns some of those 50 convenience stores, although Robertson wouldn’t say how many. They’re leased to people who run those businesses, and the fuel is supplied by Northwest Oil.

Northwest Oil’s branded supplying companies are Citgo Oil Co., Conoco-Phillips and Sinclair Oil Corp. Northwest Oil also gets gasoline from unbranded suppliers including TransMontaigne Oil Co., which is based in Denver and had an office in Fayetteville until 2001.

Distribution

Northwest Oil picks up gasoline from terminals in Rogers, Fort Smith and Tulsa.

The Rogers and Fort Smith terminals, which are operated by TransMontaigne, receive gasoline via pipeline. The Tulsa terminal, which is operated by Sinclair and Conoco-Phillips, gets its fuel from a local refinery.

Northwest Oil has five trucks that can each hold about 9,000 gallons of fuel. The company’s trucks deliver fuel as far away as Tulsa, but that gasoline comes from the Tulsa refinery and terminal.

Robertson said a refinery hasn’t been built in the United States since the 1970s because environmental laws have made it prohibitive.

Additives are injected electronically at the refinery to make gasoline a bit different from brand to brand. The major companies test gasoline at the pump from time to time to make sure it’s the proper mixture, Robertson said.

With gas hovering at about $2 per gallon, Robertson noted on Dec. 9 that the tax is 42.1 cents per gallon on gasoline and 47.1 cents per gallon on diesel.