GOLD: Rapid City's combined total building permit valuation for 2018 was more than $313 million, the third consecutive year the city has topped $300 million. It’s always good when local contractors are kept busy — unless you’re trying to hire one. The money they earn gets spent in local stores and motels, fueling the regional economy. Almost everybody benefits. Last year, the city issued 3,706 permits with a total permit valuation of $313,445,767, which included 39 permits with a valuation of more than $1 million each. The 2018 valuation total is second only to the 2016 combined permit valuation of $320,054,359 and surpasses the 2017 total of $302,570,950. Rapid City is growing.
GULLY: Why do gas stations here typically sell petroleum at higher prices than those in Sioux Falls? That’s an easy one. Because they can. It’s the same reason we have costlier airline tickets and higher home prices.
Over the holidays, one reader’s spot check of gas prices found drivers paid 40 cents less per gallon in Milwaukee than in Rapid City. It was 24 cents less in Minneapolis and 34 cents less in Sioux Falls. Recent comments in our Two Cents column have shown renewed interest in age-old conspiracy theories to explain the phenomenon. We’ve been down this road before.
In February 2016, a Rapid City Journal article noted that former U.S. Sen. Tom Daschle had conducted a series of gas price probes in the early 1990s, and then-Gov. Bill Janklow appointed a task force to again examine pricing in 1997. No clear evidence of illegal price fixing was found by either investigation. Janklow’s task force, led by retired 7th Circuit Judge Roland Grosshans, found what Janklow called “conscious parallelism,” where dealers would raise and lower prices, and competitors would quickly follow suit.
An earlier Journal gas price investigation in November 2014 found that Rapid City drivers were on average spending an extra $300 on gas per year over their Sioux Falls counterparts. That story noted that East River stations have easier access to bulk gasoline. Whereas Sioux Falls had a connection to the Magellan Pipeline and the NuStar Pipeline, which serves refineries from Oklahoma, Rapid City was connected to Magellan only. Periodically, when Chicago refineries do seasonal product flips — from gasoline to fuel oil for example — supplies of one product become scarcer and prices rise. Sioux Falls, which has better pipeline access to more refinery regions, can leverage that advantage.
The reality is, Rapid City is a long way from any highly populated area. Sellers up and down the supply chain know they have a captive audience here, and no news investigation, senate inquiry, governor’s probe or wails from angry villagers can change that. Genuine competition could change it, and that’s what makes recent excitement about the next generation of more-efficient electric cars interesting. If California goes big on electric transportation over the next several years, Texas refineries will need new customers. In other words, a genuine solution may already be in the pipeline.