Motorists in most of the country have cheered as they filled up for less than $2 a gallon recently, but Medford is only just starting to join the party.
The average price for regular is $1.80 nationwide, but hovered at $2.03 in Medford on Wednesday, according to AAA. Many stations in the area are starting to post prices below $2, although others remain higher.
This is the only urban area in the state that still has an average price above $2 a gallon, leaving many motorists asking: What gives?
Elaine Frost said she wonders why most stations charge so much while Costco in Medford has posted prices as much as 40 to 50 cents lower over the past few weeks.
"I was thinking the other companies were being a bit greedy, other than Costco just taking it in the pants," said the 44-year-old Central Point woman.
When many stations were selling gas for $2.25 a gallon a couple of weeks ago, she said she found it at Costco for $1.80. Frost doesn't always shop there, however, frustrated by the 20-minute waits and the traffic on Highway 62.
She said she's just happy watching gas drop to $2 from $4.38 on July 11 — the highest price ever recorded locally.
"At $2, it's a fair price to pay," she said.
On Wednesday, Costco charged $1.79 for a gallon of regular as cars lined up to fill up.
Danelle Romain, co-executive director of the Oregon Petroleum Association, said that based on her knowledge of the industry there can be only one reason why Costco is so cheap: "It's a loss leader."
Romain, whose company represents service stations and heating oil businesses, filled up at a Costco last week for $1.71 a gallon in Portland, then went into the store and bought an exercise bike. She suspects Costco counts on many of its customers filling up on cheap gas then shopping inside.
She said gas stations and Costco all buy from the same sources, so the price should be about the same from the distributor.
A lot of independent stations in the state have been going out of business because it is so difficult to make a living out of selling gas, she said.
Romain said she doesn't know why gas is more expensive in the Medford area, though transportation and remoteness could be factors.
She pointed out that even Costco's gas is cheaper in Portland than Medford. And Eugene's average price of $1.89 is still less than Medford's, even though that city has a 5 cent-a-gallon city tax, she said.
Bob Nelson, vice president of finance and investor relations for Costco, said his company isn't using gas as a loss leader.
"The primary thing is we are willing to make less," he said. "We are not greedy."
Nelson said the company typically makes a 1 to 14 percent profit on everything it sells.
"We're just prepared to make less than all our other competitors," he said.
The savings in gas at Costco depends on what part of the country you're living in, he said. In some parts it's 3 or 4 cents, in other parts it can be as high as 40 or 50 cents, he said.
"The delivered price depends on where it comes from and the taxes," he said.
Nelson said that when gas prices were high, motorists would typically fill up at Costco for a few cents cheaper per gallon than other stations. But with prices falling, the difference often has been greater, he said.
Marie Dodds, spokeswoman for AAA, said gas stations have different philosophies and different business pressures that dictate price.
"I don't think greed plays a part in it," she said. "It depends on when a station's gas is purchased. If it was purchased last week, the price has fallen quite a bit since then."
Last week, gas sold for $2.21 a gallon in Medford.
In general, gas costs more to ship to Medford than other urban areas of the state, said Dodds. The proximity to California, which has typically some of the highest gas prices in the nation, has an effect on what local motorists pay at the pump.
The cost of gas also is dictated by corporations that provide the fuel to stations.
Some gas stations sell at lower prices but offer a convenience store that helps improve profits, said Dodds.
Overall, the price of fuel is at levels not seen for almost four years.
Oregonians last saw the average price of a gallon of regular go below $2 in February 2005, said Dodds.
In the Medford area, pump prices were $2.08 a gallon on Feb. 2, 2005, and $1.99 on Feb. 15, 2005, she said.
A representative from Colvin Oil Co., which supplies the gas to many local stations, could not be reached for comment this week.
Robin Lebovitz, a spokeswoman for Shell Oil Co., said 90 to 95 percent of the Shell stations are independently owned and operated.
She said the owners set the prices at the pump.
Louie Webb, a trucker working for Harris Transportation, unloaded more than 11,000 gallons into tanks at the Costco station Monday.
He said he delivers to all sorts of gas stations, including those at supermarkets such as Safeway.
"There's no difference in the gas now," he said, adding that there are some additives in some brands that might make a little difference. "You might as well buy it as cheap as you can."
Reach reporter Damian Mann at 776-4476 or dmann@mailtribune.com.
