Why gas costs more in Iowa City

As a commuter in the Corridor for the past eight years, Sterling Bronemann, 31, sees gas prices daily and can't help but notice a difference between Cedar Rapids and Iowa City.

The price at the pump regularly is 20 cents per gallon higher around Iowa City, he said. Recently, he noted $2.19 gas in Cedar Rapids compared with $2.70 gas in Iowa City.

'All the gas comes from the same place, and Iowa City is just higher,” he said. 'I just think they gouge people. There is no other way to explain it.”

On Sept. 4, gas stations around Iowa City were charging $2.42 per gallon for the cheapest option - super unleaded blend with ethanol. In Cedar Rapids, the same blend was selling for $2.23.

Bronemann's complaint is a common one. Consumers typically pay more for gas in the Iowa City area, but officials and economists say it doesn't mean there's anything underhanded behind it.

'What we see is price matching, and that's not illegal,” said Jessica Whitney, director of the Consumer Protection Division of the Iowa Attorney General's Office. 'They see what other competitors are charging and match it.”

Collusion, where competitors agree upon prices, is illegal but rare, she said. The last proven case in Iowa was more than a decade ago, she said.

She said market leaders, such as Casey's General Store, set a price and smaller stations generally follow. It would be unusual for a smaller station to undercut the price, driving the market down, because the larger brands are better positioned to withstand competitive pricing, she said.

Interstate, university

In Iowa City, the price might be higher because it's along the interstate and is a college town, Whitney said. Larger cities such as Des Moines or Cedar Rapids have more commuters who have more choices.

'You have a more captive audience,” she said of Iowa City. 'They aren't going anywhere.”

Whitney said her office fields questions about regional price differences frequently enough to have a form letter.

pipeline, TARIFFS

Most of the fuel sold at Corridor gas stations comes from a Magellan Midstream Partners terminal in Coralville.

The fuel comes in on pipelines from Southern refineries, such as those in Oklahoma, Kansas and Texas, Magellan spokesman Bruce Heine said. It passes through a terminal in Des Moines before reaching Coralville. Trucks transport fuel from the terminal to gas stations throughout Eastern Iowa.

Magellan is not involved in setting the fuel prices, but charges a federally regulated tariff of 7.02 cents per gallon in Coralville. That is 1.2 cents per gallon more than Des Moines, which has a 5.82-cents-per-gallon tariff, Heine said.

John Gilroy, of distributor Harney Oil Co., said greater competition in Cedar Rapids might trigger a different pricing mentality.

'If they sell 3 to 5 percent over cost and then they have to pay the credit card network and fees, instead of making 10 cents, they are only making 4” cents per gallon, he said.

Property tax differences also could cause price discrepancies between locations, but the commercial taxes are similar in this case - $38.81 per $1,000 in Iowa City compared with $38.18 in Cedar Rapids.

C.R. ‘A TOUGH MARKET'

Dawn Carlson, president of Petroleum Marketers & Convenience Stores of Iowa, said higher population areas typically consume higher volumes of fuel so that can drive down prices, but there isn't one factor to explain differences.

'Cedar Rapids is a very tough market, tough for gasoline retailers,” she said. 'The market is so ultracompetitive. You may even find retailers intentionally dropping their prices in order to drive out the competition. Many independent retailers have had to close their doors or sell out in that market, often leaving consumers in their area driving a little farther to fuel up.”

Carlson advised looking on the bright side: Fuel costs are as low as they have been in 11 years, and Iowa fuel prices tend to be among the more competitive in the nation.

Calls and emails to Casey's and Kum & Go, two of Iowa's largest fuel retailers, were not returned.

Dave Swenson, an economics scientist at Iowa State University, said Iowa City has higher rent and land costs than surrounding areas, but it would not warrant 20 cents more per gallon, and labor is not more expensive.

'I drive to Iowa City weekly to teach a seminar every fall semester (and) have been for a dozen years,” he said. 'I never buy gas in Iowa City. Ever.”

For Bronemann, he also refuses to pay the higher prices. He fills up in Cedar Rapids.

'It just (makes me mad) that they get away with it,” he said.