Ravenwood - 05/09/05 08:00 AM
When it comes to gas prices, most people blame George Bush, "Big Oil", or taxes. But in Maryland, it's regulators who are intentionally keeping the prices high to protect small businessmen.
A gasoline price war erupted in St. Mary's County last week after one station slashed its price for regular to $1.999 a gallon and spurred three others to follow suit, giving drivers some hope of relief at the pump.That is both idiotic and anti-capitalist. If small businesses can't compete, they should find another business. Protectionists seem to think that "Big Oil" and Wal-Mart will drive the competitors out of business, and then jack the prices up to $8 a gallon. If that were true, small businesses would re-enter the market and force them to lower prices through competition. That's the way capitalism works.But the price dip proved fleeting.
Maryland regulators quickly stepped in and told the stations that their prices were too low. They needed to go up by 5 cents...The sudden fluctuation in the Lexington Park area was the result of a little-noticed Maryland law that took effect in 2001. The General Assembly mandated that stations cannot charge less than what they pay for gas -- unless they're lowering prices to compete with a nearby station.
Independent service station owners pressed lawmakers for the measure as a way to protect themselves from big retailers selling gas below cost to drive them out of business and limit competition. Maryland is one of at least 13 states to adopt similar laws, which are not in effect in the District or Virginia.
What's more, this sort of pricing happens all the time. Check out any sale paper on the day after Thanksgiving. They are filled with ads for products that are priced below cost. It's a hook to get people in the door, and gas stations should be free to do the same.
Category: Left-wing Conspiracy
Comments (5) top link me
We get all the same whining snivelling complaints over here, with petrol (cheapest) at 81.9/litre, about £3.70 /gallon. Of course, no one mentions that 80% of that goes to government in direct and indirect taxes. Having said this, I do have sympathy for the small independent retailers;They cannot subsidise petrol sales out of other sales as big shops like Tesco can.
PS - For Tesco read Walmart to give an idea.
That's... strange. Here, the smaller stores have lower prices. BP is way out there -- a good 10-15 cents higher than the small stores, and 5 cents above other chain stores. What kind of space-time continuum flux is Southern Missississippi in that this is true?
Everywhere, gas was $2.19 ($2.29 at BP) a few weeks ago. Out of the blue, one small place cut it to $2.09. No other store followed suit. That store probably lost a little on the gas but made up for it on everything else.
"$2.09! Well, I'll get some gas. Oh, and some cigarettes, and I guess this beef jerky... and a pepsi/coke/root beer to wash it down with...."
Posted by: Adam Lawson at May 9, 2005 2:12 PMSome 20 years ago when I was in the Air Force in Oklahoma and New Mexico, there was one convenience store chain that very consistently sold gas a few cents cheeper than all the other stores. Their secret:
1) They made their money on food, not gas. I don't think they actually lost money on gas (most of the time), but there wasn't enough of a profit margin left on the gas to pay the clerk's wages.
2. Only one or two pumps per store, so you often had to wait in line to get gas.
Posted by: markm at May 12, 2005 1:01 PMAnyway, this law isn't totally bogus, just close to it. Many independent gas stations have no significant sales other than gas. Sell below cost, and they will soon be bankrupt. So it could happen in theory - but I've never seen it happen in reality. It costs the big chains too much, and then because there are other big chains out there, they can't jack the prices up high enough to make up for it.
I know it allegedly did happen with Standard Oil - over a century ago, when the main product was kerosene sold by the can rather than gasoline pumped into a tank. However, the same congressional (or Senate?) hearings that supposedly exposed predatory pricing also had witnesses talking about competitors' pipelines getting cut and railroads bribed or threatened into not carrying competitors' products. These sound like much more effective means of unfair competition - but they were already illegal, someone must have been taking bribes to ignore them, and in many cases the same someone had helped the congressman get elected...
Posted by: markm at May 12, 2005 1:15 PMWhat ever happened to free enterprize???? I thought most people shop for price. If a store can lower their price and still make a profit then more power to them. Word of mouth still works very well in this day and age. They would probably get more customers and thereby sell even more. Isn't that the idea?
Posted by: Derrick Tudor at May 12, 2005 6:20 PM(c) Ravenwood and Associates, 1990 - 2014
