[Rep]

Over the years, there has been an attempt in the Wisconsin legislature to eliminate our, "minimum markup" law. This session, there appears to be a renewed effort.

The minimum markup laws were instituted in the 1930's. Apparently, at that time we were seeing a reduction in small gas stations at the expense of the large oil companies. Smaller stations were being run out of business as they could not compete with the oil companies in pricing.

In short, the law includes a number of commodities but the focus is on retail gasoline. The law requires that a retailer must charge at least 5% above what the wholesale cost of the gasoline the retailer purchases for resale. (Note: The 5% may be wrong, it may use a different calculation. The concept is the same and I believe it is around that figure.)

I ran across the following article on Walmart stores increasing their gasoline business. I am interested in hearing your opinion on the matter.

http://www.msnbc.com/news/991566.asp?0cl=cR

[deh]

We have a Sam's Club gas station which generally is atleast 5 cents lower than any other gas station. Only thing I don't like about it is they accept credit card only and I don't like using my credit cards, esp. for things like gas/food.

Just incase you don't know Sam's Club is a bulk warehouse/store where you generally purchase in bulk. The place has evolved to where you get other items (not just bulk) cheaper than alot of other places. Of course there is a $50 yearly membership.

[Rep]

Originally posted by deh:
We have a Sam's Club gas station which generally is atleast 5 cents lower than any other gas station. Only thing I don't like about it is they accept credit card only and I don't like using my credit cards, esp. for things like gas/food.

Just incase you don't know Sam's Club is a bulk warehouse/store where you generally purchase in bulk. The place has evolved to where you get other items (not just bulk) cheaper than alot of other places. Of course there is a $50 yearly membership.

deh - What has been the impact of the other gas stations around the Sam's Club? How long has Sam's been selling gas?

[deh]

Oddly enough rep Sam's is still lower but they don't "flaunt" thier prices. Case in point the gas station is in a big complex which has a Wal mart, Dollar store and Sam's club in it. It is off of a busy road. You will only see the price of thier gas when you drive into the complex and literally up to the entrance to the pumps whereas you would think they would hang a sign at the complex entrance. That is the only one I know of around me.

So the gas stations on the busy road are still atleast 5 cents more and continue to get business.

Generally though the gas stations across from each other are the same price but you could fluctuate in price by going to the next town or quite literally down the road.

I have seen a few close down but the majority seem to be thriving. I am wondering when the Wawa (big Convenience store chain) will bring thier Super Wawas which have cheaper gas into my area.

[ComputerFix]

I don't see much impact here, under similar circumstances. Gas stations (according to one former manager I spoke with) work in concert together (the ones in close proximity) to keep their prices close, and as high as possible. The differences are only found based on the corner, and when that corner is busy (more people buying gas on their way home from work than on the way to work)


IMO, the "war" is between the consumer and the stations. In a pure market economy, the market dictates price. Obviously, there is no such thing as a pure market economy, but with non-choice commodities, the consumer has nearly no say in pricing. A pound of ground beef will cost what they want to charge for it, and a gallon of gas will be what they want to charge for it. We can pay or become "vegitarians", the likelyhood of such a mass conversion is minimal, however, so they win.

[Paquadez]

Interesting.

The UK model has been that over the past 30 years, the oil majors (who repeatedly whine that they make no money from selling gas!) have bought up virtually ALL the independant gas stations.

And now we have just Three Sisters (instead of the original Seven), between themselves and the supermarkets chains, they monopolise gas retail distribution - and don't compete on price.

20 years ago, we could here and there, find Russian based gas, which was distributed by independant stations and was markedly cheaper.

Now Russian oil is also dominated by the same three sisters, this has vanished.

And this, despite North Sea Oil!

Paq

[ComputerFix]

It would figure that once the subject of gas pricing comes up someone from Europe would come in and make us Americans look like a bunch of whining babies!



Rep,

It occurs that I may not have directly answered the question you wanted to ask (not all that shocking ). I do not feel that you need to worry about "mom and pop" vs. "corporate" gas stations. As I understand it, many are franchises, and thus independently owned, and do just fine whether their sign says Jim Bob's Gas or Circle K. Beyond that, it is further up the food chain (oil companies, OPEC, etc) that are pulling the strings, therefore trying to regulate the pump price is moot....again all IMO.

[LANMaster]

Does anyone think that the Mom & Pop gas station isn't buying it's gas from one of the majors anyway?

Of course I selected the 2nd answer.
Price controls are not the solutionb to the Mom & Pop issue.
Value IS the issue.
I'd gladly spend a nickle or a dime more per gallon if the people are friendlier and carry more of the garbage that I will innevitably want.


P.S. Paq, thank you for bringing the european point of view to TSG. I'm really glat you're part of this madhouse.

[GoneForNow]

Rep.........Interesting subject. There was a recent article in the Washington Post (and I believe the matter is being investigated by the Feds) about how the major oil companies determine the wholesale price to their "independent" retail dealers. I assume that you are familiar with how these dealerships are structured, if not let me know.
Two gas stations selling the same brand gasoline can literally be across the street from each other and have a 5 cent or more difference in price. Its not that one station is gouging its because the owner is paying 5 cents more per gallon. The major oil companies have a system of "zones" that determine the gas wholesale price so two stations side by side will pay two different prices. The major oil companies have not been forth coming in how that price is determined and hence the investigation. The reason Sam's Club is cheaper (I buy at Cosco and the price is about 17 cents less) is because they buy from what are called "jobbers", independent middlemen who buy overproduction from the refineries and the jobbers resale on the spot market. They (Cosco and Sam's) also buy in bulk directly from the gasoline refineries at a price that doesn't include markup for things like advertising. When your local Exxon station buys gas he is also paying for that TV commercial with the tiger running around.

IMO, a minimum price law only serves to help the major oil companies cause they're not going to compete against each other in a price war when they control the point of sale to the consumer.

[Rep]

GB

IMO, a minimum price law only serves to help the major oil companies cause they're not going to compete against each other in a price war when they control the point of sale to the consumer.

Yet the minimum price law allows, or rather sets that the retailer would make X% above wholesale. The price war, or price gouging depending on the situation, , would still be in play above the minimum mark up. That is the level above which they can set competitive prices. Maybe I do not understand the part quoted above.

[GoneForNow]

Rep..............You need to go talk with a few of the local gas station owners who represent major brands. They don't own the gas station, they are licensees. The oil company tells them what they can charge for the gas and, more importantly, what they will pay at wholesale. Since the licensee has to pay "rent" (really a license fee) that can be changed at the whim of the oil company the profit or non-profit is really in the hands of the oil company not the gas station owner/licensee. When you talk to them I'll bet you'll find that they make about a penny a gallon of gas they sell. Where the owners make money is sales in the little convenience stores attached to the gas station. Have you notice that some stations charge for air now! The sale of gas is no longer a profit center to the station owner so he has to get his money from the other business located at the station.

The oil companies justify the licensee/licensor situation by claiming that they can control the look, service and quality provided by each station. (I've seen the manuals this owners work under and its extremely detailed down to how to clean the bathrooms.) In other words, they want each station to be like a McDonalds, cookie cutter after cookie cutter. So if I want to control the price of gas or make sure that my licensee only makes as much profit as I think he should make, I manipulate the licensing fee. They also have bonus programs for when an owners sells more gas then expected.

[Rep]

Will do. TY

[CyBerAliEn]

Let's see...

Honestly, I can't think of a single 'mom & pop shop' anywhere in the Phoenix area (the only ones I know of or have seen, to the best of my memory, are like Exxon, Mobil, Texaco, Shell, Conoco, Chevron, AM/PM, etc).

All the prices vary across the valley somewhat (probably at any given time, there is maybe a difference of $0.20 between the lowest price and the highest price, and of course, the highest and lowest ones are usually physically far from one another ).

Now, there is also a Sams Club here that sells gas. Like noted, they don't have any ads about it in the paper, on TV, etc. They don't have any signs, etc. When you pull into their complex (which is just them, they don't share it with anyone), they have their large building, and off to the side is the gas (which is about the size of a pretty normal and modern gas station). You don't see the prices until you pull up in line to get gas. The one time I got gas there which was awhile ago, the average gas price across the valley was over $2.00, and I got gas at Sams Club for something at about $1.60. Of course, you don't know about this unless you pull up to get gas, a friend tells you, etc. I also believe you need to be a member to get gas.

Do I think the 'mom & pop shops' are going to be hurt here for whatever reason? I don't think so. Primarily because I'm not sure if there are any such shops still in existance here anymore (or any time in the last several years for that matter, lol).

[EarthTech]

The local Citgo station buys its gas from the same distributor as "mom and pop"

[angelize56]

CF: I managed a Speedway station for 3 years. Every Monday we managers had to drive around within at least a 5 mile radius all directions and write down the gas prices of the other stations. Then we had to call those prices in to Marathon and they would set the price of our gas accordingly...always at least one cent lower than the competitors. I remember we were selling 300,000 gallons a month because of that lower price. I believe now I hear that practice is illegal! Take care. angel