Gas drops below $2 in Oklahoma, prompting price war

It took $1.99 and about four hours for the gas war to break out in Oklahoma City.

A month-old station in the Oklahoma capital Wednesday became the first in the U.S. to sell regular gasoline for less than $2 a gallon since the recent crude oil nosedive began, according to data collected by GasBuddy Organization Inc. Cars lined up three-deep at the OnCue on Shields Boulevard — and by 4 p.m., the 44 Food Mart down the street had countered with $1.98. Other nearby competitors started chiseling pennies away too. After sunset, seven miles away in the suburb of Moore, the Broadway Food Mart had them all beat at $1.95.

Jim Griffith, chief executive officer of OnCue Marketing LLC, said he hadn’t been reacting to oil’s tumble when he sliced 12 cents off the $2.11 that a gallon had commanded at the store before noon.

“We just wanted to give something back to our customers,” he said. “We thought what better way than to put more money in their pockets for Christmas.”

At a 7-Eleven across the road from OnCue, a woman who answered the phone said the store wouldn’t be lowering its price from $2.09. An hour later, it was $2.03.

The national average for regular yesterday was $2.746, data compiled by Florida-based motoring club AAA show. Hawaii’s $3.85 was the highest and Missouri’s $2.44 the lowest. That was before OnCue, GasBuddy said, became the first to bust $2 since 2010.

Fifteen percent of U.S. stations are selling fuel below $2.50, said Gregg Laskoski, a senior petroleum analyst with GasBuddy. They’ll be cutting prices by another 15 to 20 cents a gallon as they catch up to the plunge in oil, Michael Green, a Washington-based spokesman for AAA, said in an e-mail.

Gasoline has been sliding since OPEC decided last week not to cut production amid a global glut of oil that has dragged international rates down by 39 percent in the past five months. Pump prices have fallen by almost a dollar since reaching this year’s high on April 26.

Of all the filling stations in all the U.S., $2 gasoline showed up at Oklahoma City’s first.

Why? Three words: Location, location and taxes. About 70 miles away, in Cushing, Oklahoma, lie the nation’s biggest stockpiles of oil, just a short pipeline ride away from the state’s refiners. Neighboring Texas, home to the most fuel- making capacity in the U.S., also feeds the market. And it doesn’t hurt that the state has the fourth-lowest fuel taxes in the country.

“Let’s just say there is no supply issue there,” Patrick DeHaan, a senior petroleum analyst at GasBuddy Organization Inc., said by telephone from Chicago. “You combine that with some of the lowest taxes in the country, and they just had the best opportunity to get under $2.”

In Oklahoma City, word of the $1.99 miracle at OnCue spread quickly on social media, and the queue of cars slowed traffic on Shields Boulevard. Customers “are really surprised and very, very happy,” said the station’s manager, Vince Viot.

Isabel Santiago, 17, rushed there with her grandmother and boyfriend after seeing a Facebook post titled “God is Good,” which included a picture of OnCue’s electronic sign.

“We got $20 worth,” she said after tanking up. “I just think it’s great.”

OnCue Marketing, based in Stillwater, Oklahoma, owns service stations and convenience stores around the state that sell gasoline, compressed natural gas or both. Griffith said the Shields Boulevard store’s fuel is unbranded.

“Obviously, we’re not making any money at this price,” he said of $1.99. “We would prefer it to be in this range though. It puts money in people’s pockets and they buy more things at our stores.”

The plunge in wholesale gasoline prices may benefit gas station owners who could wait to restock with cheaper supplies. They can continue charging the same prices as nearby stations and pocket the savings until their competitors catch up.

“Any time prices go down, margins go up,” said Jeff Lenard, a spokesman for the National Association of Convenience Stores in Alexandria, Virginia. “It’s a game of chicken all the way up, and on the way down the same thing happens.”

Stations typically make a profit of 5 percent to 7 percent on every gallon sold. They get more than two-thirds of their revenue from fuel sales — but only about a third of their profits. The majority comes from higher-margin items like sodas and snacks, Lenard said.

“Lower gas prices don’t make someone thirsty or make someone hungry,” he said, “but it gives you permission to address those needs immediately.”

Gasoline stations in the U.S. South, where both taxes and the costs of producing and delivering gasoline are low, are the ones most likely to fall under $2 a gallon, Andy Lipow, president of Lipow Oil Associates LLC in Houston, said by telephone Nov. 28.

“We have plenty of gasoline in Houston,” Lipow said. “There are a number of markets here that are likely to see stations at $1.99 a gallon.”