Sibi Kuruvila, manager of an Oak Park Shell station, watched Friday morning as drivers lined up to take advantage of gas prices at a nearby Amoco station that were 12 cents lower than his.
“It’s tough for us to sell,” said Kuruvila. “Business is big time down.”
Shortly, however, Kuruvila’s Shell station got word from the station’s owner to match the Amoco price. And soon his station was again packed with cars.
Price reductions Thursday and Friday by BP Amoco appear to be trickling down to motorists, and not just at Amoco stations. The reductions appear to have triggered gas-price competition in some areas, a phenomenon not seen in Chicago for the past few weeks.
Industry analysts were not sure how low the price would go or even whether this was the start of a downward trend. On Friday, the average price in the metropolitan area was $2.12 a gallon, still far above the national average of $1.65.
“Basically, because the prices have been so high out there, when the wholesale prices drop as much as they did, the first person to drop the price looks like the good guy and is going to get the volume,” said Fred Rozell, director of retail pricing for Oil Price Information Service in Lakewood, N.J.
“But competition is always going to follow.”
On Friday, Atty. Gen. Jim Ryan ordered oil producers and marketers to prove that they are not gouging Chicago-area motorists with artificially high prices. The ease with which BP Amoco was able to cut its prices twice just hours after state officials questioned the skyrocketing costs of fuel “piqued my interest” in how those original prices had been set, Ryan said.
Ryan sent a letter to the Illinois Petroleum Marketers Association and the Illinois Petroleum Council demanding that they produce evidence within a week showing that they are not manipulating gas prices. Copies of the letters also went to six oil companies.
Bill Fleishli, executive vice president of the Illinois Petroleum Marketers Association, a group of distributors, said his members will cooperate with Ryan’s request, but says the attorney general will find nothing improper with the prices.
“We’re being victimized by a [business] cycle,” he said.
Fleishli and other oil industry executives said a series of events have led to a local shortage of gas and an escalation of prices. They blame a pipeline collapse, refinery capacity problems and a federal requirement that Chicago-area motorists use a new cleaner-burning blend of gasoline with ethanol as an additive.
Dealers are complaining that the higher prices have hurt them, putting a dent in demand for their gas. Israel Sanchez, owner of the Forest Park Shell at Harlem Avenue and Madison Street, said the decreased volume of sales contributed to his decision to sell his business.
“People are price conscious,” said Sanchez. “The way the market is now, it’s tough. . . . I couldn’t hang on anymore.”
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