Why local gas is high stumps probers
FTC says it can’t explain price gap
Published: May 16, 2009, 12:30 am
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The federal investigation into unusually high gas prices in Western New York last fall failed to find illegal activity or identify reasons for the price difference.
The Federal Trade Commission’s report — which included information gathered from the New York State attorney general’s office investigation—said it could not explain why gas prices in the Buffalo Niagara region were as much as 54 cents above the national average and consistently the highest in upstate New York.
“. . . After careful and extensive investigation, FTC staff did not find any evidence of illegal activity in gasoline markets in any of the affected cities,” FTC Chairman Jon Leibowitz wrote in a letter to Rep. Brian Higgins, D-Buffalo, who requested the investigation last October with Sen. Charles E. Schumer.
“To the contrary, staff found evidence suggesting it is unlikely that illegal conduct caused these price levels, although staff was unable to identify precise reasons why retail gasoline prices in some cities in Western New York and Vermont did not fall as quickly as prices in other Northeast cities.”
The letter said the price of gas started to go down after the call for an investigation, which Higgins heralded Friday at a news conference in the Buffalo Niagara International Airport.
“It is clear as it can be that excessive profit-taking at the retail level resulted in this huge disparity,” Higgins said. “When public light was brought to it by the local media, and our office, that disparity closed.”
The reports said FTC staff and attorneys general from New York and Vermont interviewed over “20 companies involved in these markets, including refiners, refined products, pipeline operators, terminal operators, marketers, distributors and retail station owners.”
The report said staff discovered “no company possessed a monopoly share of any retail gasoline market in Western New York, nor was any company large enough to effectively attempt to create a monopoly through illegal means.”
It also failed to find evidence that a conspiracy existed between gas station owners to raise prices.
An investigation by The Buffalo News in December 2008 found the lack of competition in the Buffalo area between companies that both refine gasoline and directly market their products allowed Sunoco—the largest such gasoline retailer in the area — to take a leading role in setting the price at the pump.
Other factors k were the lack of “hypermarketers” compared with other upstate cities. These are typically convenience stores that treat gas as a “loss leader” to lure customers.
High state and local taxes, lack of local refiners and the preponderance of Native American merchants selling tax-free cigarettes at gas stations were also called contributing factors.
The News also found the lack of regulatory oversight created the conditions for high prices—and profits.
msommer@buffnews.com
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