Opening of City Fuel heats up the competition, plummets prices in Cheney
J.T. Lidhar, new owner of the Exxon Food Mart on First Street in Cheney, one of five local outlets involved in an unofficial "Gas War," initiated by another newcomer, Suki Pooni of City Fuel. Lidhar, seen in a December 18 photo when regular gas was selling for $2.45 a gallon, has since seen his price at the pump fall to $2.15. He uses bargain gas to encourage customers to shop in his store.
As of Tuesday, Jan. 6, gas prices in Cheney still hovered just above the $2 mark.
Cheney residents got an unexpected Christmas gift this year.
Cheap gas.
In a throwback to the 1960s - except one needs to add about $2 to the price-per gallon - as gas stations in the city engaged in an old-fashioned "gas war."
These were popular marketing schemes perpetuated when one station operator on one corner would peel back prices. That forced his neighbor across the street to do the same. Prices would routinely hover between 25-30 cents a gallon, and sometimes even lower.
Reaching a peak price of $107 a barrel in June 2014, oil prices closed Jan. 5 at under $50 a barrel for the first time since 2009. Overall in 2014, the price of oil plummeted 46 percent according to news reports.
And as goes the price of oil, so goes the price of gasoline at the retail level.
Add to that a new player in the Cheney market with Suki Pooni's purchase of the former Chevron service station on First Street next to McDonalds.
The rebranded City Fuel, one of three Pooni owns in the area, was selling regular gas for just $2.05 on Jan. 5. When interviewed in mid-December, City Fuel was selling gas at $2.39 a gallon.
Previously, the station, which also offers mechanic's services, was always one of the highest priced places to buy gas in Cheney, sometimes by 20-cents a gallon.
"Chevron prices are always higher," Pooni said.
Pooni said he wanted to compete with the other sellers. He contends other sellers had "a lot of margin," referring to the profit on gas sales. "The way I look at it, lower price, higher volume," he said.
Using low-priced gasoline as a lost-leader and a hook to bring customers into the stores that sell gas is a strategy.
When customers save at the pump the business hopes to make it up inside with purchases in the store.
"If you want the customer inside you have to have the cheap gas prices," J.T. Lidhar, the new owner of the Exxon station in Cheney on State Route-904 said. "You make your profit margin inside."
Stores can't make 30 percent off gas but can from the hundreds of products inside where margins range from roughly 18-38 percent, Lidhar explained.
"That's it in a nutshell," Jerry Moczulski of Mitchell's Harvest Foods said. "Yeah, it's a big draw."
City Fuel and new arrival Maverik are within eyeball range of each other and as result help drive each other's - and Cheney's - gas prices.
"Maverik hates competition," Pooni said.
Pooni estimates that had he not ventured into the market, prices would have been hovering at about $3.60 a gallon. Cheney gas prices traditionally had been about 20 cents per gallon higher than those in Spokane, but not any longer, and perhaps for the long run if Pooni has his say.
As prices fall, Pooni is able to pass along that deal to residents.
"They are so nice," he said. "It gives me a great deal of satisfaction to know people appreciate it. Hopefully they support me."
If City Fuel would have not opened, gas prices would have stayed where they were, Lidhar believes.
Prices fluctuate by the truckload, which generally deliver loads of 10,000-12,000 gallons at a time.
"Margins vary on gas, based on the price off the truck," Lidhar said. "One load might not produce any profit, the next a little and the one following none. It's never a steady business."
Cheney Conoco on the north end of town plays along with others with competitive gas prices.
"It brings people in, it helps promote (us)," an employee, who declined to be identified, said.
However, for that gas seller, location is one of its biggest factors in drawing customers. Cheney Conoco gets a larger share of in-bound traffic into town each day because it is on the right side of SR-904, and closer to the Eastern Washington University campus.
"I haven't seen gas prices like this in a long time, maybe when (Bill) Clinton (was president)," Lidhar said. The last two administrations, however, have seen historically high prices at times, some over $4 a gallon, he said.
Repeated attempts to get a comment on the falling prices from Cheney newcomer, Maverik Stores, based out of Salt Lake City, Utah, were not successful.
Where does Pooni see prices headed? "I won't be surprised if it doesn't drop below $2," he said.
Paul Delaney can be reached at [email protected].
Cheney gas prices as of
Tuesday, Jan. 6:
Maverik: $2.05 Conoco: $2.05
City Fuel: $2.05 Mitchells: $2.09
Exxon: $2.15
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