Oahu gas stations
wage price battle;
Does anyone care?

Lex Brodie's and K&Y Chevron
haven't seen many more customers
despite dropping prices below $1.50

By Rob Perez
Star-Bulletin

A mini price war has erupted between two downtown gas stations, lowering pump prices to levels not seen in Hawaii since at least 1995.

But one of the two station owners says the prices -- below $1.50 a gallon for regular unleaded -- are failing to attract long lines of customers, suggesting people aren't overly concerned about the state's highest-in-the-nation fuel prices.

While consumers often complain about the inflated prices, many seem unwilling to change their buying habits or brand preferences to switch to the lowest providers, said K&Y Chevron owner Frank Young.

"(Those consumers) are talking out of two sides of their mouths," he said. "They buy the brand regardless of the price."

K&Y on Friday lowered its regular unleaded price from $1.579 to $1.499, the lowest it has charged since mid-1994, after Lex Brodie's Tire Co., two blocks away, dropped its price from $1.539 to $1.499.

A day after K&Y lowered its price, Lex Brodie's dropped its price again -- to $1.469. That's the lowest the company has charged since early 1995.

Young yesterday said he is considering lowering his price in response.

When the Star-Bulletin visited both stations yesterday afternoon, neither was jammed with customers, though both had a steady flow of business.

Young's theory of a price-apathetic public was borne out when Julie Takashima pulled into his Queen Street station to fill her truck -- and admitted she hadn't noticed the new price being advertised on a street-side sign.

Takashima said she always buys Chevron gas. She said lower prices at competing stations wouldn't get her to switch, something other customers acknowledged as well.

"We complain about prices, but no one does anything about it" by shopping according to price, Takashima said.

At Lex Brodie's, however, Nial Miyata stopped to gas his car precisely because of the low price.

While driving by he saw the $1.469 sign and pulled into the station, the first time he has patronized Lex Brodie's. The price is the lowest on Oahu, excluding military stations.

Miyata said Hawaii needs more price wars to bring prices down even further.

"I don't understand why prices are so high here," said Miyata, who recently returned from six months in Las Vegas, where he paid as low as 99 cents per gallon.

Both downtown stations said their price drops did not result from a lowering of the wholesale prices they are charged.

Indeed, Hawaii wholesale prices have barely budged since early 1997 despite a roughly 50 percent drop in the cost of crude oil.

And crude represents a major component of the price of retail gasoline, according to the Petroleum Research Foundation, an industry-funded nonprofit organization in New York.

Based on national numbers, the cost of crude typically represents more than one-third the pump price, including taxes, said John Lichtblau, foundation chairman. Excluding taxes, crude typically accounts for more than half the retail price, he said.

"It's the most important single item outside of taxes," Lichtblau said. When the price of crude drops, most of the savings generally is passed to consumers, he said. "It doesn't necessarily get passed through fully, but largely."

If Hawaii's market followed that trend, pump prices here would have dropped by roughly 25 cents a gallon or more since early 1997.

Instead, they have generally fallen less than 10 cents.

Lichtblau, professing little familiarity with the local market, said he wasn't sure why Hawaii didn't follow the national pattern. "There's nothing like it (anywhere else) in the United States," he said.

Local oil company officials say Hawaii's gas market is not driven by costs but competition.

John Mayo, president of Lex Brodie's, said his company is not making money at current pump prices but decided to offer them to help consumers in rough economic times.

Asked how long he intends to keep his price at $1.469, he said, "As long as we can stand it."

Young likewise said he expects to lose money at his new pump prices -- unless he gets a huge increase in business to offset lower gross profit margins.

"I'm trying to find out how badly consumers want cheap gas," Young said. "Basically, what Lex Brodie and I are doing is offering consumers something, and so far they're not taking it."