The recent drop in gas prices across Superior likely was the result of a "good, old-fashioned price war," an industry analyst said Thursday.
"These types of things don't last," said Patrick DeHaan, senior petroleum analyst with price-watching website GasBuddy. Generally, DeHaan said, two neighboring gas stations try to undercut one another, leading to an artificial drop in prices.
"It looks like two stations got into it, and the motorists were the winners," he said.
Motorists this week were surprised to see prices drop to $1.75 a gallon at many stations in Superior, significantly lower than the $2.19 seen across Duluth.
GasBuddy keeps a running tally of the 10 lowest gas prices in each state, and in Wisconsin on Wednesday morning, all of them were in Superior.
By noon Wednesday, prices had jumped by 44 cents a gallon in some spots to match the $2.19 typically seen elsewhere in the Twin Ports. KwikTrip and Krist stations increased first, followed by most Holiday stations a few hours later.
On Thursday morning, the SuperAmerica at 1405 Broadway St. and the Minit Mart at 2104 Tower Ave. were still at $1.75, according to GasBuddy. But don't expect that for long.
The wholesale price for regular gas in Superior on Thursday was about $1.53 a gallon, DeHaan said, but that doesn't include federal, state and local taxes, nor costs associated with fuel delivery.
If you add in taxes and costs, stations need to charge about $2.06 to break even, DeHaan said. When motorists use credit cards, it costs the station slightly more, so the break-even cost might be closer to $2.12, he said.
"So at $2.19 a gallon, they're only making maybe 7 cents a gallon, and that has to go to rent, labor and other costs," DeHaan said. On a typical day, he said, a gas station aims to make about 15 cents a gallon. At $1.75, the stations simply wouldn't be able to stay open for long.
"They're losing money on every gallon that they're selling, and that's not sustainable," DeHaan said. "These stations are literally paying the motorists."
Under Wisconsin law, gas stations are prohibited from selling fuel for less than cost, which is defined as what stations pay for fuel plus a cost-of-doing-business markup of 9.18 percent — likely more than the $1.75 posted earlier this week.
However, the law is not consistently enforced, as it relies on complaints being filed by competitors. According to Wisconsin state statute, only the first station to drop its price below cost would be in violation; the law makes an exception for nearby stations attempting to match a competitor's price.
"With this law in place, this price war would seem illegal," DeHaan said. "It could be that the first station owner did run afoul of that law."
DeHaan, however, says that states with laws like Wisconsin's - if they're enforced - probably end up with higher prices and less competition than elsewhere, which he sees as regrettable.
"It's a shame that offering lower prices is potentially seen as illegal," he said.
Calls to Krist Oil Co. and KwikTrip, who were the first to drop their prices in Superior this week, were not returned as of Thursday afternoon.