Posted in: Gas Prices,
by Gregg Laskoski on Jun 23, 2012 08:00 AM
We're all seeing lower gas prices but in New York the state average is still well above the rest of the country, and in the NY metro area, prices are even higher. They always are.
Only one state in the country taxes gasoline higher than NY's 67.4 cents per gallon (that's Connecticut's $0.71) so it's always frustrating for residents in the NY metro area to see their neighbors in New Jersey pay less than half the taxes they pay. NJ fuel taxes are 32.9 cents per gallon.
We bring this up because when we hear legislators talk about "defending the consumers' right to fair gas prices" we can't help but think that excessive taxation is probably the best place to start.
In New York nobody's talking about reducing gas taxes, but the state legislature is taking a closer look at "zone pricing" for gasoline, the dubious retail pricing strategy that groups retail locations and fixes prices they pay from distributors at pre-set levels. That means a gasoline distributor might charge the retailers near the tony neighborhoods a lot more money for the same exact gasoline that he delivers to a retailer in a less attractive area just a mile or two away.
It's a practice based on data that identifies property values, property taxes, education and income levels, and basically pushes prices higher in select markets where the algorithm says it's a competitive price for that market. Of course, it all simply boils down to the fact that wholesalers and retailers will charge what they believe they can get away with. When consumers go elsewhere, the retail prices they decline to pay usually come down.
Zone pricing, New York Assemblyman Fred Thiele says, unfairly inflates NY's already high gasoline prices and that's why the State Assembly drafted a bill to amend the general business law to prohibit zone pricing with respect to motor fuels. The bill (A.7775-B) would identify the relevant geographic market to mean "the geographic area which is supplied by the same terminal facility," and would prohibit "the arbitrary establishment of price differences based on the geographical location of retail outlets."
In a phone interview earlier this week, Thiele said the current bill builds upon a zone pricing law that New York enacted four years ago. The Attorney General found that initial law very difficult to enforce because it was too vague and issued a report in December 2011 recommending some language changes.
Specifically we wanted a clear definition on what 'the area of effective competition' is. And we wanted to define what 'legitimate costs' are that can be added to the cost of gasoline. We want the legitimate price to be charged and we know they can vary from place to place, but this law now says you can't set up zones and you can't charge a higher price simply based on geography," Thiele explained.
Thiele said his district covers the east end of Long Island between the North Fork and South Fork "where gas stations are three or four miles apart, but the price differential today, as a matter of fact, is 30 cents a gallon."
Thiele added, "They're served by the same terminal facility. Differences in transportation (delivery) costs don't merit that. That's what we're looking at."
"We know stations that are high volume, high traffic locations are going to be different than the 'mom-and-pop' gas station at the corner that does repair work and doesn't really care if they sell any gasoline."
These are similarly situated stations; same brand, same company, just spread apart by a few miles. I understand there are many factors that impact prices, and if price is based on market factors, competition, that's fine; but if they're just setting a higher price based on geography, that is not fine."
This law gives consumers a remedy, Thiele says, because it gives the Attorney General the ability to investigate it. I used to be a local government attorney and when it came to zoning laws, the only way to get it enforced is because somebody complained. It's going to be same thing here. If consumers are complaining then the AG has the right to do an investigation. It allows retail competitors to file a zone pricing complaint and do the same thing. If something is based on geography and not on legitimate costs, he'll be able to bring an action.
NY consumers now do not have a legal remedy where zone pricing is concerned. If passed, this bill at least gives them that remedy, says Thiele. The NY bill has passed the Assembly and still has to pass the State Senate.
Sounds like a smart step in the right direction.