Monday, July 21, 2014

Rural town opens city-run gas station, selling cheaper gas from local refinery to lower prices

A rural Southern Kentucky town has found a way to beat high gas prices. The city of Somerset ventured into the retail gas business, "opening a municipal-run filling station that supporters call a benefit for motorists and critics denounce as a taxpayer-supported swipe at the free market," Bruce Schreiner reports for The Associated Press. The station opened Saturday with prices set at $3.36 a gallon, three cents lower than competing stations. (Schreiner photo: Filling up at the city-run station)

Somerset is able to supply residents with the gasoline because the city purchases gas from a hometown supplier, Continental Refining Co., Schreiner writes. "The city purchased a fuel storage facility for $200,000 a few years ago. Now, up to 60,000 gallons of regular unleaded gas can be stored there for the retail business."

The local refinery has struggled to stay open because of competition with Marathon Oil Corp., which makes most of the gas consumed in Kentucky. Marathon has paid haulers of Southern Kentucky oil extra incentives to take oil 172 miles away to a Marathon refinery near the West Virginia border, instead of to the shorter distance to Somerset. 

While townspeople have responded positively to the station, there are plenty of critics, Schreiner writes. Convenience store owner Duane Adams called the move a slap in the face that could hurt his business. He told Schreiner, "They've used the taxpayer money that I have paid them over these years to do this, to be against us. I do not see how they can't see that as socialism."

But Girdler, a Republican in his second term, "said the city isn't looking to put anyone out of business," Schreiner writes. He told Schreiner, "We don't care if we don't sell a drop of gasoline. Our objective is to lower the price." A local economic-development coordinator told Schreiner that Somerset gas prices are often 20 to 30 cents a gallon higher than in nearby towns, and Girdler said many visitors to nearby Lake Cumberland "fuel up elsewhere, costing Somerset millions of dollars in retail sales," Schreiner reports.

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