As pump prices fall below $3 a gallon, local price wars ignite

As pump prices across Arkansas retail locations move below the psychological $3 a gallon level, local price wars are igniting at strategic and high-traffic transportation hubs as consumers employ smartphone apps and other digital tools to find the cheapest gas.

Late Tuesday evening during rush hour at the corner of the busy and highly-traveled University Avenue and Colonel Glenn Road intersection in Little Rock, motorists danced in and out of traffic to fill up their tanks with regular unleaded $3.03 per gallon at the almost-new, 20-pump Kum & Go convenience store.

A mile down the street in all directions, there are no less than a dozen other gasoline retailers scrambling to respond every time to the market leader’s frequent price-cutting gambit – which can take place several times a day.

Retailers are also using every marketing tool available – from gas pump advertising displays to old-fashioned "we got a sale" window signs – to get motorists to enter their stores and purchase other goods to cover low fuel profit margins at most privately-owned, mom-and-pop gas stations and convenience store chains.

And motorists are responding.

"I like it when they keep cutting the price every time I drive by. I hope they keep on doing it until it gets down to $2 dollars a gallon," said Little Rock resident Reggie Harris, who lives near the busy University Avenue corridor.

WHAT'S AT WORK?
Greg Laskoski, senior petroleum analyst with GasBuddy.com, said there are a number of factors working together to drive down prices in all regions of the U.S. – from the annual refinery industry annual mid-September switch to cheaper winter blend fuels to decreasing demand for motor fuel following the peak summer driving season that traditionally ends on Labor Day weekend.

Other factors include the falling price of domestic and international crude futures and the fact that consumers are a lot more savvy about finding ways to lower their commuting and everyday fuel costs.

"Already we have 17 states that have prices below $3," Laskoski said. "In Arkansas, we are seeing prices as low as $2.89 in Springdale, and that is the cheapest in the state."

Nationwide, the GasBuddy expert predicts that by the time Halloween gets here, more than half of the states in the U.S. will be selling regular unleaded under $3 a gallon.  

"We think that by November, 30 states will be under $3, (which) is an important psychological threshold where consumers feel like they have more money in their pocket because they are spending less at the pump," he said.

Laskoski's forecast is not surprising given that the U.S. Energy information Administration most recent short-term energy forecast on Sept. 9 had to be revised to account for rapidly falling pump prices in every region of the country.

The EIA, the U.S. Department of Energy’s interagency for energy forecasting and statistics, had projected pump prices to decline to an average of $3.18 gallon by December, 12 cents lower than what was previously predicted in the prior month. On Wednesday, the national average price for a gallon of unleaded had already ratcheted down another 11 cents to $3.34 from a week ago, and is well ahead of pace to hit the EIA’s price target before the Christmas season.

In the Gulf Coast region, which includes Arkansas and five other states, the average price Wednesday for a gallon of regular unleaded was down to $3.12, 10 cents cheaper than a week ago.

According to AAA, today’s average price is a nickel less than one week ago, a dime less than one month ago and 14 cents less than a year ago. It is also the lowest price seen in more than seven months.

TECH SMART
Laskoski said the fierce competition and declining pump prices in Little Rock along the University Avenue corridor and other high-traffic areas in the city’s metropolitan area is also being driven by another emerging factor – savvy drivers with smartphones and other Internet-based gas-shopping tools.

He said 45 million people across the U.S. have downloaded the popular GasBuddy fuel price app, which allows consumers to locate gasoline stations near them with the cheapest fuel price. It also earns drivers points toward prize giveaways that often can help lower their fuel bill.

The app allows Gas Buddy’s huge community of users to work together to quickly update fuel prices almost in real-time by by sending in local fuel prices as they are posted, Laskoski said.

"That allows us to update every few hours," he said.

In Little Rock on Tuesday, prices ranged from $2.99 per gallon to as high as $3.63 per gallon across the city’s metropolitan areas. Laskoski said the 64 cent spread in the Little Rock market is not unusual, but consumers can now have the power to bypass the higher prices if they find out that another gasoline retailer down the street is selling its fuel at a cheaper rate.

"(Cheaper gas) may just be around the corner," he said. "That is why the app is so successful."

PSYCHOLOGICAL BOOST
Laskoski, like many others, also believes lower fuel prices have a positive effect on motorists and the economy.

Two weeks ago, the National Association of Convenience Stores (NACS) released its monthly consumer fuels survey showing that optimism among U.S. drivers increased 8 percentage points from in August, mainly because of lower fuel prices.

NACS, which represents more than 151,000 convenience stores across the U.S. with annual motor fuel sales exceeding $491 billion, conducts the monthly consumer sentiment to gauge how gas prices affect broader economic trends. The most recent report said 47% of gas consumers across the U.S. were optimistic about the economy, the highest level of optimism in 14 months.

"We have seen increasingly wide swings in economic mood over the past three months as consumers continue to sort out how world and national events could affect their economic security. At the same time, it appears that what happens at the corner store with gas prices continues to play a major role with consumer sentiment," Jeff Lenard, vice president of strategic initiatives for the national convenience store lobby, told Talk Business & Politics.

On Wednesday, pump prices in the state’s metropolitan areas ranged from a low of $3.07 per gallon in the Fayetteville-Springdale-Rogers to a high of $3.11 per gallon in the Little Rock area, according to the AAA’s daily fuel gauge.

Motorists in the Fort Smith area are seeing prices at an average of $3.08 per gallon, while travelers and residents to Pine Bluff and Texarkana are paying an average of $3.10 a gallon to fill up their tanks.

The next release date for the EIA’s monthly shorter energy outlook is Oct. 7.