Higgins blames retailers for region's high gas prices
Says profit margin of 55.1 cents per gallon is more than double the national average
Gasoline retailers in Western New York are marking up the price of gas more than double the national average and are to blame for the region’s high cost for the fuel, Rep. Brian Higgins charged Friday.
Gas stations are tacking on an average of 55.1 cents per gallon compared with the national average of 23.6 cents a gallon, and in Jamestown, Higgins said, retailers at one point were charging an average margin of 71 cents per gallon, making that city the most “profitable market in the country.”
Higgins, at a news conference, said he based his claims on “very disturbing” data compiled by the Oil Price Information Service, an independent group that analyzes the price of gasoline across the country.
Buffalo Niagara’s gasoline prices have consistently ranked as the highest or close to the top in the nation in recent months, despite the plunging prices for a barrel of crude oil.
“Every extra penny in gas prices paid by Western New York consumers has an enormous ripple effect on an already distressed economy,” Higgins, D-Buffalo, said. “This region must again stand up for ourselves and demand justice on this matter.”
Higgins has asked the Federal Trade Commission to shift its ongoing investigation into the high gasoline prices here to the retail level.
“It’s clear that taxes and supply issues do not set us apart or sufficiently explain the vast discrepancy,” he said.
In a letter to FTC Chairman William Kovacic, Higgins cited the Oil Price Information Service data and the lower prices of gasoline in other upstate regions to make a case for focusing on retailers.
“The OPIS data clearly shows that the origin of the discrepancy is aggressive profit-taking at the retail level,” Higgins said, noting that the average price of a gallon of gasoline here is $2.29, while in Albany and Syracuse, it was $2.07 and $2.03, respectively.
In addition to the FTC investigation, State Attorney General Andrew Cuomo has stepped up his investigation into the disparity in gasoline prices between Western New York and other areas of the state.
“Subpoenaes have been issued across the supply chain and if any violation of the law is uncovered, we will pursue it aggressively,” said John Milgrim, a Cuomo spokesman.
While Higgins believes he has found the culprit for high prices, his assessment came under strong criticism from the New York Association of Convenience Stores.
“Attempting to draw conclusions about retail profitability based on a snapshot of price data at any given moment produces misleading results,” said James Calvin, the association’s president.
The profit margin that Higgins refers to, Calvin said, represents the gross margin between what retailers pay for the fuel and what they charge customers.
“Much of the gross margin goes to pay expenses associated with selling gas, property taxes, labor, energy, environmental protection and especially credit card processing fees, which at a pump price of $2 wipe out four to six cents of the retailers gross margin per gallon right off the top,” Calvin said.
Last spring, he said, margins set by Western New York gasoline retailers were among the lowest in the country, “averaging a mere two cents per gallon” and in some cases stations sold gasoline at a loss.
“It’s not fair to point fingers when retail margins are elevated without acknowledging the offsetting periods when they are low or even non-existent,” he said.
Sales of tax-free cigarettes and gas by Native American retailers, he added, deprive tax-collecting, off-reservation retailers of the opportunity of doing business with large numbers of customers.
Because of that, Calvin said, non-native retailers have to make up the loss with higher gross margins on other products, including fuel.
The controversy over the region’s relatively high gasoline prices comes as the cost at the pump continues to fall. Oil prices hit four-year lows Friday in a continuing decline so dramatic and so sudden that it is raising the prospect that gas prices could soon fall below $1 a gallon in some areas. A gallon of gasoline can now be purchased for 50 cents less than it cost just last month.
Log into MyBuffalo to post a comment
MyBuffalo is the new social network from Buffalo.com. Your MyBuffalo account lets you comment on and rate stories at buffalonews.com. You can also head over to mybuffalo.com to share your blog posts, stories, photos, and videos with the community. Join now or learn more.
Reader comments