posted May 12, 2008
On Sunday afternoon at 1 p.m., regular unleaded was $3.479 or $3.499 at the three mini-marts along Mountain Creek Road--two Kangaroo (BP) and one Phillips 66. At 5 p.m. Monday, the price was $3.679 at all three stations.
Eighteen to 20 cents in one day is bad enough, but at all three stations? Does anybody else think this is "price fixing?" Maybe one of our legal professionals could give an opinion.
Stephen W. Schmidt
Chattanooga
stevedj_98@yahoo.com
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For years now gasoline prices have been changing daily, sometimes more than once a day at the same station. Seldom does the price vary by more than one or two cents from one station to another in any neighborhood. And seldom does the price drop for long, before going even higher. Most of us who must buy gasoline don't like it, and we have a strong feeling that we're getting ripped off. We're just not sure how it's being done.
Neal Boortz on WGOW talk radio says that it's perfectly reasonable for a gas station to raise the price as soon as the owner knows that he's going to have to pay more for the next bulk fuel delivery. After all, it's going to cost him more than ever to fill his tanks, so he has the right to pass that increased cost on to the consumer. But Neal Boortz is a lawyer.
Those of us ordinary folks who have to pay ever-escalating prices sense that there is more going on than meets the eye. We feel like we're being cheated, paying above and beyond the legitimately necessary costs to the oil companies and dealers. And I do believe we are correct. Although it's obviously possible for any business to raise their retail price as soon as wholesale prices rise, that doesn't make it right.
Maybe if we play 'follow the money' it will all make some sense: it is safe to assume that at some original time, on day one, a gas station owner first had his new tanks filled at cost one, and first set his gas pumps at price one, a price calculated to give him the desired (or allowed) profit. However long it may take to sell all of that fuel, whether it's one day, one week, or one month, he will make his original profit above his original cost on every gallon of that original gas. And there's nothing wrong with that; it's the way retailing works (or is supposed to work or imagined to work).
When the tanks are empty, and he has them refilled--probably at a higher cost--then his new pump price will reflect that higher cost and his reasonable profit. We can understand that. But if he has his tanks refilled when they are still half full, and the bulk dealer charges more per gallon for that refill, and the station owner immediately sets the pump price higher--oh, then we begin to see the unfairness. Now we're paying a higher price on that original lower-cost gasoline--perhaps giving the owner a double or triple profit on it. He's getting his full profit on the 'new' gas, and even more on the stuff left over from the previous fill. Boortz says that is eminently fair, but Boortz is a lawyer; I say we are subsidizing or financing the gas station.
And here's where our real gripe comes from: now we see the big sign prices and the high pump prices fluctuating (going up, of course) every time some distant, invisible oil trader promises to pay more for oil three months or six months or a year from now. That's right; the gas stations raise their prices right now because they know they're going to have to pay more next week and next month and ... forever? Any gas that is already in their tanks is sold to us at a price based not on what it cost them, but on what they figure they'll have to pay when it's time to refill those tanks.
That's why we instinctively feel like we're getting cheated--because we really are getting cheated. We aren't paying just a fair price (including profit) for the station's existing stock; we're paying next month's price in advance, investing in his future costs rather than reimbursing him for his past costs. We are now financing that gas station; we are the involuntary backers of that business, rather than merely customers. But we don't get any stock certificates, and we sure aren't making any profit on our investment.
No ordinary businessman could open an ordinary store on that extraordinary basis. Did Food Lion charge us two prices during their first year here, effectively building and stocking their big stores at our expense? I don't remember that happening; if they'd tried that, there still wouldn't be any Food Lions in town. No, their own investors put up their own money and bought store stock which was then sold to us at a profit, and that system obviously works. We accept it. And now the local gas station owners, the franchise owners, operators, managers, whatever--they all scream that they certainly aren't making anything extra from ever-rising gas prices. They say that it costs them money just to sell their gas to us. It probably does take a lot of employee time to keep raising the prices on all of those signs and at every single pump. Their gripe may be true.
My brother once 'owned' an Exxon station, meaning Exxon once owned my brother. He was allowed three cents per gallon above cost, no matter what he set his pumps at; if his price went up, so did Exxon's. And he always had to pay an absolute minimum price, so he couldn't ever set his pump price lower and sell more gas and get a better wholesale price. Needless to say, my brother didn't get rich in the gas station business, and he didn't stay in that line of work any longer than he had to.
So, since we are paying more for gas every day, and what we're paying today isn't really based on what that gas cost the company yesterday, and the gas stations are only allowed to keep a few cents for every gallon that they sell, then where is all of that truly unnecessary and unjustifiable price we're paying going? That is the question, that is the detail that gripes every one of us every time we even see a gas price sign. We recognize a rip-off even if we can't explain it fully. We must suppose that the extra, the excess, is going to the distributors or somewhere else higher in the supply chain. That line of reasoning leads quickly and directly to the oil companies, somewhere, somehow, and you can bet that the money is just about impossible to trace by the time it gets there.
Do I feel better now, having analyzed our collective problem to this small extent? Not really, because I still know we're all getting cheated, and I even have a suspicion about how it's being done, but I really can't do a doggone thing but gripe about it. Whoopie.
Larry Cloud
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