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WPCNR Gasoline Alley. By John F. Bailey. March 20, 2007. UPDATED 3:20 PM EDT: It has been two weeks since Westchester County surveyed White Plains service stations in their monthly gasoline price survey. On March 6, those prices averaged about $2.73 a gallon. Two weeks later they have ratcheted up as high as $2.89 a gallon for regular octane, and over $3 for high test. The Department of Consumer Protection has no legal recourse to stop the seasonal cash grab at the pumps, WPCNR has learned.
Mugging at Gasoline Alley: Gas prices in White Plains are up 10 to 20 cents in two weeks. A spokesman for the American Petroleum Institute attributed part of the increase to a $6 increase per barrel in the cost of crude oil within the last two weeks. Photo, WPCNR News.
As of March 6 in the County Capitol City, the most inexpensive place to fill up was Petro Plaza at $2.589 for regular at 592 North Broadway Plaza, and the most expensive was Getty at 190 Aqueduct Road at $2.71.9 for regular.
But the pennies per gallon have been going up all over town and county for two weeks. The WPCNR Mobile Unit payed $2.88 for regular in White Plains this weekend, at a station which was charging $2.70 a gallon two weeks ago. In contrast prices in eastern Connecticut Monday for regular right off I-95 in Milford – a 45 minute drive east — were $2.55 for regular.
Refinery Fires and summer gas switch
Gary Brown of the Westchester County Department of Consumer Protection said he was afraid there would be more price increases ahead as the spring and summer travel season approached. Just how much prices went up in White Plains and elsewhere will be determined by the April Consumer Protection Department gas survey.
Brown said the 10 to 20 cent rises were due to a combination of two refinery fires on the west coast restricting supply occurring at the same time refineries were transferring to the summer blends of gasoline which have ethanol added to reduce emissions. He called this an “unfortunate combination of circumstances.” He also said Gulf of Mexico refining capacities were still not at full-strength.
The North County Times in San Diego reported February 28 on its website that a refinery fire at a Chevron facility in Northern California and a Valero Refinery in Texas causedf partial production shutdown last month. Prices in San Diego are now at $2.81 a gallon — comparable to the White Plains increases we are seeing. The national average was $2.38 a gallon as of this week.
The API Institute Clarifies
The American Petrolium Institute in a news article published today, said the nation’s crude oil inventories fell 3 per cent due to a rise in gasoline demand of 4.5% over last year. The API reports that “scheduled maintenance and preparation for a switch to summer blend fuels pushed capacity utilization to fall to 85.4% — but said gasoline production was at an all-time high for February, 5.2 million barrels a day.
Ron Planting, a spokesperson for the API told WPCNR today that the fires and seasonal maintenance had diminished California capacity to 72%, but said that did not directly affect New York prices. He attributed the cost to two factors: the price of crude oil has moved from $50 to $56 a barrel in the last two weeks, and the cost of additives in the summer gasoline formula.
In January, he said, light crude was $60 a barrel. It declined to $50 in February, and now has gone up to $56 in the last 14 days.
He said that at this time of year gasoline is reformulated to reduce the rate at which it evaporates. To do that, Planting said, you have to take out octane and replace it with another ingredient.
He thought at the present trend of oil futures in April that the 10 to 15 cents to the cost per gallon we are seeing was in line with the price trend that coincides with reformulation process that takes place at this time of year.
He said New York got most of its supply of gasoline, jet fuel, heating oil and diesel fuel via the Colonial pipeline from the Gulf of Mexico. He said that the API’s most recent survey showed the Gulf supplies were running at 91% of capacity.
Can’t stop the Penny Flow.
Asked how service stations can raise prices on fuel already delivered and in their storage tanks, based on anticipated prices, Brown said the County Department of Consumer Protection is powerless to step in under normal market conditions that apparently exist at this time.
Brown, speaking to WPCNR Monday said that gasoline prices in New York state are “basically unregulated,” and charges of gas gouging can only be brought under New York State business law if it can be proved that a gasoline station raised prices excessively “during any abnormal disruption of the market,” meaning catastrophic disruption of the market.
The Attorney General of the State of New York did bring charges against My Service Center, Inc., of New Rochelle in 2005 and won its case in August of 2006, using Westchester County’s Department of Consumer Protection paperwork and records, proving gas gouging in the aftermath of Hurricane Katrina, Brown said.
The Gas Gouger Law Limits Gouge Reach.
The charges were brought under New York General Business Law 396-R and Executive Law 63 (12). The statute defines “abnormal disruption of the market” to “mean any change in the market, whether actual or imminently threatened, resulting from stress of weather, convulsion of nature, failure or shortage of electrical power or other source of energy…”
Gouger Not Required to Return Excessive Profits to State.
The Supreme Court of New York found for the Attorney General directing My Service Center, Inc. to pay the Attorney General’s Office a civil penalty of $2,000 – and the amount of the excess profit it generated by price gouging, Judge Lippman finding that “Without question, Hurricane Katrina created an abnormal disruption of the market as to trigger application of these protective provisions.”
However all the service station had to pay was the $2,000 amount because Judge Lippman determined the consumers who purchased the “gouged gas” were impossible to locate.
Mr. Brown was asked why prosecute gas gouging if the offending service station was not going to be forced to repay their windfall profit. Brown said the station was also placed under an injunction not to price gouge in the future, and if they did they would be subject to more severe civil penalties.
The case considering it only cost the gas station $2,000 (including costs plus their own legal costs) for the state to prosecute it shows how much gas stations are profiting on every gallon, and this case is based on 2005 prices.
Pennies Per Gallon Profit Margin Is a Lot of Pennies.
Judge Lippman’s decision is instructive in showing just how much gasoline retailers mark up their wholesale gasoline.
Lippman based his decision on the GBL 396 language defining price gouging as either “that the amount of the excess in price is unconscionably extreme; or that there was an exercise of unfair leverage or from unconscionable mean; or a combination of both factors…”
My Service Center, the court papers note, contended its prices “are only relative to the prices it receives the Exxon distributor, which on average are substantially higher than competing brands of lesser quality.” My Service Center, said, the papers report, it “normally profits 8-10 cents per gallon but “increased the profit margin based upon the anticipated steady price increase from the supplier during the period leading up to and after Hurricane Katrina.”
However, based on Westchester County documents and invoices, the court determined that
“it is evident respondent (My Service Center) hiked its retail price to maintain its inflated profit margin, i.e., the difference in the price it paid its supplier and the pump price, subsequent to Hurricane Katrina. For example, immediately prior to Katrina, respondent’s per gallon profit margin was 67 cents, an amount, the Court notes, is in excess of its (My Service Center’s) asserted typical 8-10 cengt margin, which margin then jumped to a high of 99 cents a gallon on September 1, 2005. What this translates (ed) to is a retail pump price of $3.45 per gallon for fuel respondent purchased only the day before from its supplier for $2.46 per gallon. On September 7, 2005, the retail price at respondent’s station was $3.62, yielding respondent a per gallon profit of 88 cents based on its supplier’s wholesale price of $2.74 on September 3, 2005. Petitioner (Attorney General) declares that respondent’s assertion that its supplier’s price point justifies its elevated margin rings hollow in the face of these figures. Thus, petitioner categorically asserts that respondent’s price increases in the post-Katrina days run afoul of the GLB’s and Executive Law consumer protection prohibition. The court agrees.”
The court in denying reimbursement of such excessive profits notes there were no invoices or receipts supplied “to calculate the amount of excess profits subject to disgorgement.”
Brown told WPCNR though the county has no power to regulate gas prices, its monitoring of gas prices serves to give consumers a way to find the lowest gas prices. WPNCR did exactly that last night, refueling the Mobile Unit for $2.76 at Shell on North Broadway as opposed to the robber baron who was charging $2.89 a gallon less than a mile away.
Going to the County Department of Consumer Protection gas survey will show you the current price range of stations in White Plains as of March 6.
The gas price survey may be viewed at http://www.westchestergov.com/consumer/
