T Nation

Govts Doing Their Part WRT High Gas Prices

And of course, this is in addition to the taxes imposed on gas at the consumer, producer, and whatever other levels they can impose it…


[Todd Zywicki, May 6, 2005 at 9:28am] 1 Trackbacks / Possibly More Trackbacks
Maryland Protects Its Consumers from Low Gas Prices: Yes, believe it or not, Maryland is concerned that gas stations aren’t charging consumers a high enough price for gasoline, so they have ordered local gas stations to raise their prices:


[i]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.

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.

In as much time as it takes to fill the tank of an SUV, prices at BJ’s Wholesale Club, Sheetz and two Wawa outlets bounced to $2.049 a gallon.[/i]

This is pursuant to a state law enacted in 2001 that prohibits so-called “sales below cost” of gasoline. Note, however, that unlike predatory pricing under the antitrust laws, these laws have been interpreted to not require recoupment or other elements of predatory pricingby the purported unfair competitor ( http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=10th&navby=case&no=036067 ).

We criticized several of these laws when I was at the FTC (in Kansas ( http://www.ftc.gov/opa/2004/03/kansasgas.htm ) and Wisconsin ( http://www.ftc.gov/be/v030015.htm ), for example), through the FTC’s competition advocacy program ( http://papers.ssrn.com/sol3/papers.cfm?abstract_id=610586 ). Maryland, however, did not request the FTC’s input at the time they enacted their law in 2001. Maryland, which appears to have never met an ill-considered anticompetitive regulation that it didn’t like, also is one of the states that have adopted divorcement regulations, which further tend to increase gasoline prices ( http://ideas.repec.org/a/kap/regeco/v18y2000i3p217-33.html ).

Walter Williams had an excellent column a little while back criticizing the Maryland law. As he put it:

[i]A couple of weeks ago, heading down to George Mason University, I pulled into my favorite Wawa gasoline station just off the Bel Air, Md., exit on I-95 South. At each of the 20 gasoline pumps, there was a sign posted that Wawa would no longer dispense free coffee to its gasoline customers. Why? The station was warned that dispensing free coffee put it in violation of Maryland?s gasoline minimum-price law.

Here?s my no-brainer question to you: Do you suppose that Maryland enacted its gasoline minimum-price law because irate customers complained to the state legislature that gasoline prices were too low? Even if you had just 1 ounce of brains, you?d correctly answer no. Then, the next question is just whose interest is served by, and just who lobbied for, Maryland?s gasoline minimum-price law? If you answered that it was probably Maryland?s independent gas-station owners, go to the head of the class. [/i]

Williams also has an excellent analysis of the public choice dynamics of how these laws get enacted, notwithstanding their harm to consumers.

Thank goodness we have Maryland’s intrepid regulators on the case to protect consumers from paying too little for gasoline. The WaPo article reports that the state has logged 31 violations in the four years that the law has been on the books–do the state regulators really not have anything better to do with their time than to protect consumers from cheap gas?

Let me put this another way – perhaps de-regulation would be a good way to put a dent into gasoline prices, which are related to oil prices but obviously include a whole bunch more costs imposed courtesy of our state and national governments.