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September 8, 2005

What if?

by Chris Feeney

What if Y2K hit the gas pumps? Remember back at the turn of the century, technology was a concern for many, as much of the worldís computers and software were not built with the millennium in mind. So experts were worried that when we went from 1999 to 2000 that it might cause serious problems.

Itís 2005 now, and most of the doom and gloom went unrealized as Dick Clark rang in the troublesome New Year and we all made it through without any major issues.

Well, speaking of doom and gloom, as well as zeros rolling over, many consumers this week experienced a Y2K-like dilemma at the gas pumps. Many of our nationís old, mechanical analog gas pumps were not built to show a price above $2.99.

That posed some concerns this week as the unthinkable occurred. Unleaded fuel skyrocketed past $3 per gallon locally and as high as $5.87 at some urban pumps in other states. So, the old analog tanks had to have their price gauge covered, meaning buyers could not easily track how much the fill-up was costing.

Iím surprised some of the newer gas pumps didnít follow suit. It sure would have made it a little easier to swallow when you saw the dollar figures soaring to $50, $60 and beyond to fill up your truck or SUV. I decided to observe the Missouri Department of Agriculture guidelines as developed by the Weights and Measures Department for the old pumps. I decided I was old and was not capable of displaying gas prices higher than $3 so I put a blindfold on while I filled up my vehicle.

While I joke, I must admit that I donít fully understand how gas prices work. I assume that a tanker shows up at the station and leaves a load of fuel, for which the retailer pays a set price. Again I assume, that means the seller knows how much the gas cost and the price is set to allow a reasonable profit level.

What I canít understand is how gas stations outside of Atlanta got away with charging $6 a gallon immediately following Hurricane Katrina. I know what they say about assuming, but I figured that the reason for higher prices was the concern about availability of gas, as a shortage was a possibility with the storm knocking out refineries and supply lines.

Yet the stations had gas to sell, and that gas should have been purchased at the normal, albeit inflated prices we saw nationwide prior to the storm. Perhaps they are psychic and they offered to pay higher prices to the wholesaler in expectation of the crisis. I suspect there may have been a little gouging going on.

That nasty word raised its head nationwide, including in Missouri. Apparently I was not the only one having trouble following the logic of price jumps of 35 to 50 cents overnight August 31 and September 1. Did all those places get their gas delivered that evening?

Okay, so the Energy Department and the Federal Trade Commission really have no power over what gas stations set their prices at. Really the only time the FTC can do anything is when it can prove anti-competitive behavior such as collusion among retailers to raise prices.

So it falls to the state level. Many states actually have anti-gouging laws, including Missouri. Governor Matt Blunt has called for Attorney General Jay Nixon to investigate the issue. Some states were fined for price gouging following 9/11.

Personally, I donít believe it is the retailers that are doing the price gouging. Sure there maybe a little wiggle room there, but we all know who is really making all the money thanks to these high prices, the oil companies. Call me crazy, but there has never been a better argument for E85 and biodiesel. At least then it would be farmers that had the power to do some gouging back.


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