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Tuesday, April 25, 2006

Gas Gouging: What You Can Do

"We'll make sure that the energy companies are pricing their product fairly. If
we catch 'em gouging, if we catch 'em in unfair trade practices, we'll deal with
'em at the federal goverment. That's what you expect the federal government to
do."


This reported by WCBT in Boston is a remark by President Bush on Tuesday. President Bush is expected to follow through with an investigation by the Justice Department. However, some remain skeptical.

In Virginia there is a gas price gouging law that goes into action when a state of emergency is declared:

The Attorney General’s Office and federal agencies such as the Federal
Trade Commission and the U.S. Department of Energy continue to monitor gasoline
prices in an effort to determine whether changes in prices are caused by normal
market forces or by other factors that may violate state and federal competition
laws.

In addition, the Virginia legislature passed a price gouging statute at the
2004 session of the General Assembly. This statute is triggered when
either the Governor or the President declares a state of emergency.

The price gouging statute requires the Virginia Attorney General, and other
enforcement agencies, to consider whether post-disaster prices of a supplier
grossly exceed the prices the supplier charged for the same goods or services
during the ten (10) days immediately prior to the disaster.

The statute also requires consideration of whether the increased costs are
attributable solely to the increased costs of the supplier. The Attorney General
is prepared to act if an emergency is declared or if a determination is made
that our competition laws are being violated.


There is a form consumers can fill out and send to the State of Virginia, unfortunately this is only active during declared emergencies.

If you want to file a complaint about gas gouging perhaps your best bet is to go to Virginia Attorney General's website were you can file consumer complaints.

14 Comments:

At 11:52 AM, Anonymous Mappo said...

Oh please. To anyone who understand a thing about economics, the whole concept of "gouging" is ridiculous. There is demand. There is supply. Where the two meet, there is price.

Here's an idea. If you think a company is overpricing their product, THEN DON'T BUY IT. Ridiculous, I know.

 
At 2:32 PM, Blogger Melissa O. Markham said...

Mappo,

I have to agree with you on this one. I don't believe there is gouging going on. We still have some of the lowest prices in the world, if not the lowest. The prices are still now relatively lower than what we paid in the early 80's for gas.

It is hard, no doubt about it, with gas prices going up and that makes everything else go up too. I am not happy with it and sincerely hope that this pushes scientists and the government to get off their butt and work on alternative energy! But I don't think gas stations or companies are gouging. I have read several articles about it and there is more demand for gas than ever before (partially due to China). This is just the way this diminshing resource is going to go. I have friends who run gas stations and they only make a few pennies per gallon.

So next time you get gas, don't give them a hard time. They aren't on their way to wealth and riches!

 
At 2:41 PM, Blogger DAN said...

I agree with Mappo.

The first time there was a big gas price increase, like in 1972, people should have learned something about the free market and supply and demand. Instead, it looks like they decided to belly-ache and get mad at politicians.

It's almost 35 years later, folks. If you think the oil companies (who make about 9% profit total -- not very good compared to other companies) are somehow stealing from the consumer, then the answer is simple. Go to the commodities market online, buy your own oil or gasoline directly from the supplier. Do the taxes and figure out the transportation cost, and you're a lot better driving down to the local Citgo.

The fact is oil and gasoline are commodities, like rubber, pork bellies, beef, or a thousand other commodities. There's nothing secret about them. Anybody with a computer and a checkbook can go buy and sell it. Check the prices. Figure it out for yourself.

If nothing else, remember that there are something like a billion Chinese and Indians who are getting new cars. Do you really think your gas price is going to stay at two bucks? I mean, I wish it were true, but do people really think that's going to happen?

 
At 3:03 PM, Blogger B O B said...

Recently, I recommended people buy gas in Bedford City. Gas there is running about 6 to 8 cents cheaper than in Lynchburg.

In Roanoke the prices are running the same about six to 8 cents cheaper. Most of the suppliers for gas in our area get supplies from Montvale which is about half way between Roanoke and Lynchburg.

Now to me would be a big question, why are Lynchburg prices higher? And with the variance of lower gas prices, just out of the city what is the reason for the difference? All the prices in Lynchburg pretty much run from 2.84 to 2.89 for regular.

If competion were a valid reason for this price range should we not see prices in the 2.78 range also? I have asked this question before, so far I have not seen a good answer.

 
At 3:14 PM, Anonymous Mappo said...

Here's a good joke:

Three guys are in a jail cell. They start to talking and find out that they're all gas station owners.

The first one says, "I set my prices at a couple of cents higher than my competitors. I'm in here for price-gouging."

The second one says "I set my prices at a couple of cents lower than my competitors. I'm in here for predatory practices."

The third one says "I set my prices at the same price as my competitors. I'm in here for collusion!"

 
At 7:50 PM, Blogger Melissa O. Markham said...

I think I have an answer for you Bob about the difference in gas prices. I am assuming that all or most of the gas for Lynchburg, Bedford and Roanoke comes from Montvale. Bedford is the closest to Montvale of these three localities. Roanoke would be next closest, plus would have the advantage of bulk buys for more gas stations than are present in Lynchburg. Then comes Lynchburg.

Distance of gas transported would affect the cost of the gas as the transporting companies will charge by the distance.

 
At 9:06 PM, Blogger DAN said...

Yep. Melissa is correct.

Besides supply and demand, there is market risk, transportation, and storage costs.

And to be fair, 8 cents a gallon on $2.50 is only about a 3% difference. You can find a 3% difference on a lot of products around town! If anything, the gasoline stations sell as cheaply as they can, hoping to sucker people in to buy sodas and other knick-knacks (where there really is a big markup)

I know people like getting mad about the cost of gasoline, and I don't like it one bit, but there's really nobody to blame. There have been dozens of investigations -- heck, it seems like there is a new investigation every year on gasoline prices. Is that because there is some evidence of wrong-doing? Not at all. It's because the politicians are scared of angry voters! As they should be. But in this case looking for scapegoats is not productive. Just my two cents. I know it doesn't make people any happier, but I'd rather be mad about stuff I can do something about.

 
At 11:03 PM, Anonymous Mappo said...

I agree 100% with what dan just said. Bush is just engaging in populist nonsense, trying to minimize the damage at the polls when voters (wrongly) blame him for high gas prices. He should be above this crap.

Now, if we bomb Iran and prices truly go through the roof (which they will), then I think voters might be justified in blaming Bush (depending upon what level of threat they perceive Iran actually poses to us).

I still remember when gas was like 79 cents. It doesn't seem that long ago.

 
At 11:14 PM, Blogger Melissa O. Markham said...

LOL, but Mappo, it was a long time ago. I can remember gas in the 60 cent range and that was 24 years ago! Time flies when you are having fun!

 
At 12:19 PM, Blogger B O B said...

Thanks for the comments all, here is something more for you to think about:

Montvale is 12.46 miles to Bedford. If you divide the miles driven into the retail price you get a fuel factor of 4.48 based on 2.78 per gallon. Lynchburg is 40.9 miles from Montvale. When you do the same for the lowest cost of 2.84 in Lynchburg you get a factor per mile charge of 14.4, which shows a considerable price per mile jump. This put another way a fuel tanker truck carries 6,300 gallons, would show a return of 378 dollars more once it reached the Lynchburg market than when making a delivery to Bedford. Do you really think the 378 dollars just covers the cost of transportation?

 
At 1:41 PM, Blogger Melissa O. Markham said...

Bob, first of all, I hate math! I mean, I really, really hate math! Also, what you are leaving out of your equation is other factors...contracts, local taxes, how the person pays.

I am also a bit confused by your math. You said you divided the miles driven into the gas price. You say you divided the miles driven into the price of the gas, but you did the opposite. If you divide the miles driven into the price of gas per gallon, it would be .223 in Bedford and .06 in Lynchburg. If you divide the other way(miles driven by the price), you get 4.48 and 14.4 meaning it costs more to transport the gas to Lynchburg than to Bedford.

And this really makes my head hurt! So if you take your 6300 gallons and multiply it by you get a number that means something, but my head hurts too much to figure it out!

Anyway, I don't think the equation is that simple. There are road taxes based on weight involved, there are local taxes involved, there are local stores involved. We have a guy down the road from us (2 miles) that sells his gas low making minimum profit so that people will come into his store. I have even heard he has taken a loss on gas to do this. Right now his prices are 2.79 a gallon. He hauls his own gas too, BTW.

So I am putting my calculator away, getting out my tylenol and thinking about how expensive mowing my lawn has become!

 
At 2:08 PM, Blogger DAN said...

These kinds of conversations can go on for a while! I hope to be able to post again, please accept my apologies if I cannot.

There are so many factors it's difficult to say. With only a 3% difference, things like weigh stations, fuel fees, local taxes, long-term vs short-term contracts make a big difference. Heck, maybe some of the guys just want an extra three pennies on the dollar. That's hardly highway robbery.

It's certainly not worth driving to Bedford to save the difference. With gasoline prices so high, unfortunately a few pennies here or there is to be expected when every gas station owner is supposed to be able to price his goods fairly. If I own my own trucking fleet, for instance, or if I buy from a large cooperative, I can probably get better hauling rates than if I was all alone. I could go on with the examples, but the variables spiral out of control!

I played around a bit with a spreadsheet on this, and I'm glad I'm not a gas station owner! I don't think I could ever make it work.

 
At 7:42 AM, Blogger corndog said...

Could it be that the owner(s) of the storage and mixing facility in Montvale also have ownership in retail within the Roanoke area? If so, that they would give themselves a slight competitive advantage wouldn't be unusual. I understand this is how this has happened in other markets.

Anyway, GREAT THREAD!

 
At 9:42 AM, Anonymous Anonymous said...

Another factor to consider is that Roanoke has its own distribution facility in addition to access to Montvale. So, distribution costs lower in Roanoke. If you drive around Roanoke and L’burg, you’ll see different prices in different parts of town even for the same companies. Timberlake Rd is highly competitive, with some stations selling below cost.

You have independents operators, some branded, others not. Other stations are owned by the distributors. For example, Apple Markets are owned by Workman Oil. Sheetz takes it a step further – they own the stores, distribution, and their storage facilities.

Branded stations are more expensive and different brands cost differently also. But I noticed last year that unbranded stations were out of fuel more often than branded.

 

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