NJGCA: Federal Gouging Law Proposal Wrongly Scrutinizes Service Stations, Creates Contrived Mistrust Of Small Business Owners
Federal Gouging Law Proposal Wrongly Scrutinizes Service Stations, Creates Contrived Mistrust Of Small Business Owners
Legislation would permit targeting fuel retailers for “excessive” prices;
Like all brick and mortar merchants, service stations can only react to market forces;
Gouging claims are misleading, harmful, and distorts public opinion against small business community.
WALL, NEW JERSEY – Sal Risalvato, Executive Director of the New Jersey Gasoline-Convenience-
“Congress is wholly misguided and misinformed in putting forward this proposal,” said Risalvato. “They’re taking a shot at service stations for high fuel prices, while disregarding the reality in how these prices are determined in the first place.”
The proposed bill singles out motor fuel sales to guard against “excessive” fuel prices; grants the President authority to issue an energy emergency proclamation in any U.S. jurisdiction for 30 days; and permits the Federal Trade Commission (FTC) to hand out penalties for “exploitative” price gouging.
Among the fuel types implicated are gasoline and diesel fuels, which are consumed by most private and commercial patrons.
“Washington is failing to recognize that my members are prey to the same market volatility that consumers are. As prices rise, they can only pass along those costs while simultaneously diminishing their own profitability. Any proposal that ignores these certainties is, at best, frivolous feel-good legislation. If implemented, it can only harm our members, confuse small business owners, and increase the perception that station owner are out to extort their customers”, explains Risalvato.
In reviewing the legislation, Risalvato questioned what the proposal will achieve and if it was needed.
“First, Washington is ignoring the fact that states like New Jersey already have anti-gouging measures in place. Second, they are giving the FTC, a federal agency, the authority to target small business owners like my members for perceived gouging. And third, they are ignoring the reality that a federal directive may not neatly square with New Jersey’s own anti-gouging mandates. That will create more confusion for the small business community and add another regulatory burden to unintentionally run afoul of”, Risalvato said.
“Somebody in Washington needs a cheat-sheet on how the industry operates. And if they can’t find one, they can come and get educated by our members. Had they done so, they’d understand stations survive on slim margins. In fact, the retail profit margin on a gallon of gas is the smallest part in what makes up the price to motorists. That’s the reality in New Jersey and across the nation. These profits are geared toward making sure expenses are covered – and that includes the price per gallon our retailers must pay to suppliers when they receive a delivery,” stated Risalvato.
When prices rise, as they have been, it is not the small business retailer that is adding profit to their bottom line. Rather, it is the retailer that is passing along those increases to the consumer.
“If there is any party participating in the market that supports lower wholesale prices, it is the station owner. That’s because the profitability in a gallon of gasoline has historically been a static proposition. The higher prices rise, the higher credit card transaction fees increase, which eats into the small business owners’ profits. While everyone is fixated on the price of gas, the banks are quietly reaping billions as their fees are based on a percentage of the final sale price, Risalvato said. Risalvato questioned, “Do you think Visa and MasterCard would rather collect a fee for $3 a gallon gas, or would they prefer $4 a gallon gas? Is anyone in Congress proposing gouging laws that target credit card fees”?
Since March 1st, the average price of gas that is delivered to stations has risen by $1.03; and has increased by $1.25 since February 25th. The Russia-Ukraine conflict, inflation, and other market realities have only added to the current volatility.
“This kind of volatility can see sharp overnight increases; only to have prices plummet a few days later, and then spike back up again. An unlucky retailer that takes delivery on the wrong day, just as prices abruptly rise, faces a huge financial burden. The owner is compelled to increase their street price to cover the expense of paying for that fuel load. If a competitor hasn’t received a load in that same delivery window, this only adds to the perception that a given retailer is overcharging their customers. Why? Because the competitor who purchased their load a few days later as prices steeply decline is not forced to steeply hike their prices; they’ve basically won the retail lottery. Not only is the competitor not seen as overcharging customers (as the initial retailer is unfairly perceived), but he or she is not driven by market forces to sharply increase their street price. This factual reality can only drive patron traffic to the competitor and help them sell their inventory more quickly, even as the unlucky retailer is forced to keep their price high to cover the cost of the higher-cost delivery. This has created a great variation in prices on the street as retailers must pass on the cost of the previous delivery” explained Risalvato.
The high cost of fuel is also a contributing factor to the inflationary market. Higher transportation costs, which are partially dictated by fuel prices, are driving up the price of goods and services.
“Every customer knows higher fuel prices will harm them. When transportation costs rise, so do consumer prices. If the cost to deliver groceries to the local supermarket increases, the price on store shelves must rise to account for those expenses, and it is passed on to the patrons. It’s the same for the airline industry, local landscapers, the neighborhood restaurant, and just about everything else” stated Risalvato.
Washington’s proposed “solution” ignores all these real-world considerations and will ultimately harm entrepreneurs and their continuing relationship with customers.
“Congress is granting the government an excuse to make it seem like they’re “doing something” to stop prices from spiking. In pursuing legal action against retailers for perceived “excessive” pricing, they’re giving the public a reason to entertain the idea that station owners are extorting them. Neither one of these realities addresses why fuel prices are high, nor helps consumers stretch their budgets to make ends meet,” explains Risalvato. “As an organization, I’d be remiss to point out that unlike Washington, some rational legislators in Trenton are putting forward a meaningful proposal to reduce the burden on Garden State motorists. Assembly bill A3105 would offer consumers the option to pump their own gas if they choose, while maintaining the current full-service paradigm. Those choosing to pump for themselves would save as much as 15 cents or more if they pump their own gas. Unlike Washington, Trenton is actually offering an idea that actually solves a problem.”
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