The Speedway Effect, Cincy style

Recently there was an article and news story on WCPO in Cincinnati about Speedway. In it they said a lot of things TheGasGame readers would already know, plus something I found interesting at first, and one outright falsehood.

They come right out of the gate letting us know Speedway’s secret: Real estate.

“We wanted to know how Speedway is able to change its prices market-wide without fear of what the station across the street is going to do. What we discovered is that in most cases, there is no station across the street.”

They used Google Maps and Street View to confirm that 63 out of 92 had no direct competition. This is how they are able to raise prices and not worry about the competition. I had never thought of this before. I started mapping Indianapolis Speedways, and sure enough, 30 of the 52 stations there have no direct competition.

I thought about this revelation a little further, and it really isn’t a Speedway thing. I found about the same ratio of other branded stations have stand alone stations compared to ones having competition. And then, it is also rare to see a Wal*Mart next to a Meijer, or Target; and a Lowes next to a Home Depot. Seems Speedway’s secret isn’t much of a secret at all. Not to mention they don’t do anything to prove this is why Speedway raises prices the way they do.

Then there is the outright falsehood.

“The vast majority of Speedway locations jumped to $2.65 with no corresponding spike in oil prices. Oil futures did go up 3.2 percent the day before, but gas prices in Cincinnati shot up by nearly four times that amount. And oil prices were actually falling while our gas prices were rising that Tuesday.”

The article and story was run on the 25th, but the spike up in prices happened on the 17th. Oil went up on the 17th, not down. Also, oil does not set the price of gas in this area (the PADD II). That would be the Chicago Mercantile trading of the Chicago Spot.

An analysis of the Chicago Spot from November 9th to the 17th shows that while it rose from $1.8218 to $1.9224, the average price of gas fell, almost 11 cents in Indiana, 9 cents in Michigan and 13 cents in Ohio. The Speedway spike caused averages in those three areas to go up 17 cents in Indiana, 11 cents in Michigan (with higher UP prices included), and 22 cents in Ohio.

They were far from jumping up with no correlating spike. They did not even meet the difference in each area. A 10 cent rise added to how the average fell in each area shows Speedway undercut Indiana by 4 cents, Michigan 8 cents and 1 cent in Ohio.

The rest is stuff we here at TheGasGame have been preaching a long time, long before even I came along. Speedway is the leader, selling 1 of every 5 gallons of gas. They have more corporate stations that any other. After Speedway rises, others follow, a statement that flies in the face of the earlier revelation that Speedway stations have no local competition.

If you haven’t visited the “Speedway Effect” article here at TheGasGame, I suggest you do so. You’ll learn far more accurate information than you did with this article. Also, if you have followed me at my Fair Price threads in the GasBuddy forums in Indianapolis, Indiana and Michigan, you can see I have discovered the pattern, and can pretty accurately predict when a spike will happen.

My new feature here at TheGasGame continues that. It’s called “The Spike Line”. It is a new name for what I have been doing all along in the “Fair Price” threads. It’s just a more accurate title. When the Spike Line is crossed, you can expect a spike up in prices from Speedway, it’s that simple. If there are other circumstances to cause or prevent a spike I’ll let you know that there as well. It’s just another way that TheGasGame is helping you save money. It’s one of the big reason’s I am proud to be a part of it.

4 Comments

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  1. Thanks, Bill. That’s a real great use of Google Maps. It would be interesting to ask stations who they think their competitors are.

  2. I actually created a Google map with all the Speedway stations in Indianapolis:

    http://maps.google.com/maps/ms?ie=UTF8&hl=en&msa=0&msid=115158334925445799090.0004688d9f5bd9c2c5a42&t=h&z=11

    Red is alone, blue has competition.

  3. Depends on what your definition of ‘nearby’ is. walking distance? 1 mile? 10 miles? Most Speedway stations I can think of in Indy have a competitor within a minute or two drive. Only some of the ones on highways and such are truly ‘alone’.

  4. Wow, that is very interesting.

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