Why's the gas so high?

Aug. 11—ASHLAND — While gas prices are starting to ease off a bit, motorists in northeastern Kentucky have been wondering why local prices are still 40 cents higher than the state average with a refinery literally in their back yard.

According to AAA, as of Monday the gas prices statewide were pegged at $3.61 a gallon, roughly 40 cents lower than the national average of $4 a gallon. However, motorists in Boyd County have only begun to see the trend downward — in Ashland and into the Summit-Cannonsburg area, prices were pretty much $4.09 to $4.13 a gallon, while in the Catlettsburg area a few stations actually dipped to the statewide average on Monday.

But then the stations undercutting the rest hopped back up to around $3.89.

The Daily Independent posed a Facebook question to readers the same day — how are they coping with the crunch at the pump?

Most had a simple answer — they quit driving as much. Some had heartbreaking answers — they had to cut back on food. Some blamed the President, while others blamed the greed of oil executives.

Rick Clark, co-owner of Clark's Pump-N-Shop, said the gas price is pretty much out of his hands — it gets set at "the rack," or the wholesale price from the refinery. While his company primarily does business with the Catlettsburg Refinery — which according to its own stats pumps out 290,000 gallons of gas a day — he also will get it from a terminal down in Lexington or up in Columbus, even Knoxville if the price is right.

But it's just not the price that Marathon sets — according to Clark, the state tax and the federal tax gets factored in, too. For every gallon of gas bought from the refinery, Clark said he has to cough up 26 cents to Kentucky and 18 cents to the feds. In West Virginia, it's about 35 cents and in Ohio it's 38 cents.

For those keeping tabs at home, 44 cents is the tax the motorists are paying at the pump.

Then there's the transportation costs as well — running a truck is expensive, given the hourly rate, the benefits paid to the driver and the cost of diesel, Clark said.

"A lot of people think I want the gas price to be high, but that's far from the case," Clark said. "When the gas gets high, my costs go up. So while the dollar amount in revenue goes up, it's the margins that count."

And the profit in convenience stores over the last 20 years comes from the candy bars and the pops, not the gas, according to Clark. Less money for a Snickers and a Coke because the gas price is higher than a Grateful Dead concert means less money in Clark's pocket.

When asked about the 20-cent price difference between the Summit Pump-N-Shop and the U.S. 23 Pump-N-Shop on the Catlettsburg/Ashland border on Monday, Clark said competition is what drives it; the market rate being set by what everyone else in a given area is charging, even if it's not that far apart.

Another factor in that, according to Clark, is how quick the gas moves — if a station has a low turnover in gas, then it'll take longer for the price to come down because they have to sell the gas already in the ground paid at the higher price.

"There's very few stations here that sell 100,000 gallons a day," Clark said.

So looking at an area like central Kentucky, where there's a higher population and more gas stations, Clark said the market down there might be lower today, but at times it can be higher than here.

"We have stations down there, it fluctuates all the time," Clark said.

For the record, on Monday's straw poll of gas stations, it appeared the Speedways on up 23 to the Greenup line were the most sky high, charging $4.19 a gallon before Speedy Rewards is used.

Funny thing about that is, while the $4.19 Speedways offered a 6-cent discount, the Catlettsburg Speedway (charging $3.89) had a 3-cent discount.

According to the U.S. Energy Information Administration, the resale average for a gallon of good ol' 87 octane was $2.30 a gallon in January. In March, the latest data available it hopped to $3.10 a gallon.

While Rick Clark said he's getting pain at the point of sale, and 200 readers have said they're feeling pain at the pump, a spokesman for Marathon Petroleum said the pricing gets set due to the trading of crude oil, which is a very volatile market.

Russia invaded Ukraine in late February, resulting in an oil embargo against Russia, causing oil futures to skyrocket.

However, SEC records show Marathon approved an incremental buy back of $5 billion worth of stocks from the shareholders on Aug. 2, after working folks shelled out $5 a gallon to get to work.

When asked about the buy backs — about $1.4 billion had occurred in the first six months of 2022, according to the SEC reports — the Marathon spokesman did not address that.

The same SEC reports note the margin for a barrel of refined gas went up from $11 per barrel in the first six months of 2021 to $26 per barrel in 2022 for marketing and refining.

(606) 326-2653 — henry@dailyindependent.com