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Local gas prices falling, but not as fast as elsewhere

Gas prices are a good news/bad news story in the region.

The good news is, they’re falling. The bad news is, they’re falling faster in other places.

The Buffalo Niagara region’s average price on Monday was $3.49 per gallon, down 15 cents, or 4.1 percent, from $3.64 a month ago, according to AAA of Western and Central New York. Compare that to the current national average of $3.04, which was down 39 cents, or 11.4 percent, from $3.43 a month ago.

Motorists who remember shelling out more than $4 per gallon a few years ago are taking note.

“I think it’s great, and I think New York should catch up with the rest of the country,” said Kathy Murray, who was filling up her 2012 Chevrolet Malibu at a Sunoco station near Gates Circle in Buffalo.

“Buffalo’s really high compared to other parts of the country,” said Pamela Righter, a Buffalo resident, who drives an Audi Allroad. She is struck by the lower prices she sees when traveling to Ohio ($2.93 average) or Pennsylvania ($3.17). “I don’t know – what is it about Buffalo?”

There are different theories, but not a single, agreed-upon explanation.

Some observers say the Buffalo region’s mix of competitors is an influence.

Patrick DeHaan, a senior petroleum analyst with Gasbuddy.com, said prices fall more slowly in some parts of the country, not just here. “In Buffalo, the status quo may be that (retailers) may be less competitive” with each other, he said.

In other words, DeHaan said, there may not be a retailer aiming to sharply undercut its competitors’ prices in this market and force others to follow suit more quickly.

As retailers drop their prices, they eat into their own profit margins, he said, so they are generally not in a rush to do that, unless they see a chance to increase the volume of gas they sell.

Steve Pacer, a spokesman for AAA of Western and Central New York, said an influx of new competitors in the region who sell gas for less might change the dynamic and help bring down overall prices.

Fred Floss, professor of economics and finance and executive director of the Fiscal Policy Institute at SUNY Buffalo State, said the region’s handful of distributors are influential in the prices ultimately charged by retailers at the pump, through a “leader-follower” approach.

“If I see or I hear that another distributor has raised his price a penny or half a penny a gallon, then I’m going to try to do that, too, and maybe I try to get a full penny out of it instead of a half penny,” Floss said. “They sort of drive themselves to raise the prices.” The same pattern can happen in reverse, as distributors see competitors cut prices and fear losing business, he said.

Floss said those types of decisions are made region by region, where the mix of distributors can vary. “It isn’t as if Albany sees Buffalo’s prices are lower and they lower them. They’re looking within their region.”

Lawrence Southwick Jr., a retired economics professor from the University at Buffalo’s School of Management, said transportation is another factor in the price of gas here. “You have to get it from somewhere, and it has to be shipped,” and the refineries are not locally based, he said.

New York State is the most expensive of the lower 48 states to buy gas at the pump, according to AAA data. State taxes on gasoline and the cost of regulations are often blamed for New York’s high ranking. Among the eight metro areas in New York, the Buffalo-area average gas price was the highest, ahead of even New York City.

Gas prices around the country have fallen as the price of crude oil has dropped. The nation’s refining and distribution system has not experienced any recent disruptions, such as a hurricane, which tend to drive up prices. And the industry in September began switching to a winter blend of fuel, which is cheaper to produce, Pacer said.

Nationally, gas prices are at their lowest level in about four years, DeHaan said. While observers are wondering if the national average pump price will slip below $3 per gallon mark, the Buffalo area – with the exception of stations on Native American reservations – has a long way to go in order to achieve that average. The local average price has been stuck above $3 for about four years.

email: mglynn@buffnews.com