Gas station owners just trying to survive
Sunday, September 21, 2008
In response to talk about price-gouging by oil companies, I want to say a couple of things from a gasoline retailer's point of view.
First, it should be pointed out the fuel that was already available here and bought at lower prices was street priced based on the reasonable expectation of a continuing supply. When it became clear Hurricane Ike was going to hit the Texas coast and the refineries were shutting down and no more continuing supply would be available, the value of those existing gallons significantly increased. Supply and demand.
Hurricane Gustav already had pinched the supply line, and with the refineries not producing, the pipeline not pumping, and the fact it would take seven to 10 days at best to get it all back up and running, we were looking at a limited supply of fuel. That, in turn, caused prices to rise, especially in light of the "panic" buying going on Friday, Sept. 12, the day the storm hit.
And there was a lot of "panic" buying going on Friday. This buying greatly increased demand, unnecessarily, on what was already a limited supply, putting even more upward pressure on prices.
As for gouging, the state of Alabama considers "excessive pricing" to be prices that exceed 25 percent of the average retail price of that product in the 30 days preceding the declaration of an emergency.
For example: If the average price in the preceding 30 days for a particular retailer was $3.50 a gallon, then the retail price should not exceed $4.375 during the state of emergency, unless you can provide documentation that your "actual costs" incurred can be shown to be greater.
As for my station, the lowest price I have posted in the past 30 days was $3.599, and the price I posted Sept. 12 was less than 25 percent of the lowest I had posted in 30 days. With this in mind, except for a few stations that had real "actual cost" issues, I don't think I saw any prices that would be considered "excessive" by the state. Most, I would say, were well within the 25 percent range; the majority of which, like myself, were a good bit less.
Consumers need to remember we are looking at the very real prospect of running out of supply altogether, as I did after Hurricane Ivan for seven days in 2004. We must look at the long run of what is going on and position ourselves to make it through the entirety of the shortage, so we can stay open, do business, pay our people and have some gas to sell to those in real need.
At the time of this writing, I knew of at least two stations in my immediate area that have not had any resupply since running out Sept. 12, yet they still have all of their ongoing bills to pay, not the least of which is their employees.
I don't like the higher prices any more than my customers. But if that is what I must do to keep from being put out of business, then it must be done.
If you look around, the higher prices have had the desired effect of tempering demand, which, in turn, has caused those prices to begin to fall back toward normal levels. If nothing else, this situation has personified the basic economic principle that price is gauged by the availability of supply of a product and the relative demand for it.
With the price of oil continuing to fall and the prospect of resupply becoming a reality, I am fairly sure consumers will see a sizable decrease in the price of gas in the next seven to 10 days, all things being equal.
I hope this gives a more clear picture of what it is like for a single, independent retailer like myself who can ill-afford to be out of business for even one day.
I, like many others, learned some very hard lessons after hurricanes Ivan in 2004 and Katrina in 2005. I did not move my prices fast enough then and ended up being out of fuel for a significant amount of time, which nearly bankrupted me.
This is not like a grocery store running out of milk or bread. It's more like McDonald's running out of hamburgers; why would anyone stop there at all? Lee Emond Sr. operates Dodge City BP/Highway 69 Fuel Center in Cullman County. E-mail: firstname.lastname@example.org.