Even before he knew
who his Republican gubernatorial opponent will be this fall – and indeed, even
before his own all-but-certain nomination by the Democrats was official –
Kentucky Attorney General Jack Conway fired his first shot in his bid to win
the Bluegrass State’s top spot.
Unfortunately for him,
his shot was a dud, missing the mark entirely.
Conway has long railed
against gasoline pricing in Kentucky, blaming high costs at the pump on what he
asserts is a monopoly on the wholesale market in the state by Marathon
Petroleum. His latest salvo was a lawsuit filed in federal court last month.
During his remarks following the filing of the suit, Conway lashed out at the Federal
Trade Commission for what he calls inaction on his complaints about Marathon
and its business practices since buying the Ashland Oil refinery in Boyd County
several years ago.
Given the fact that
the FTC is part of the Obama administration, and knowing how Democrats hate
“Big Oil” and are constantly criticizing oil companies for ripping off
consumers, if Obama’s FTC isn’t acting on Conway’s complaints, there must not
be anything to them.
But at any rate,
Conway’s ire is misguided. Instead of complaining about Marathon’s alleged
refinery monopoly costing consumers money, he should really be looking at the
collusion on pricing by retailers within individual markets.
If you travel much, it
doesn’t take long to notice a pattern. Gas prices are pretty much the same at
every station in a small town or community, or at every retailer in a certain
area of a larger city. Within the city limits of Beattyville, there are four
gas stations owned by three separate companies. Yet the price is the same at
each one. Ditto for Jackson. Drive down the town’s main drag, and the price is
the same at each of the five stations you’ll pass. When the price goes up at
one, it’s not long before it goes up at all the others.
A few weeks ago, I had
to go to Whitesburg for work. You can’t go any farther southeast in Kentucky
than the Letcher County seat. Keep going in that direction, and you’ll be in
Virginia in a few miles. Whitesburg is 80 miles from the Mountain Parkway, so
it’s not exactly the most accessible place in the Bluegrass State. Yet gas
prices there were consistently below $2.50 a gallon, easily the cheapest in the
region. Still, all the stations there were selling gas for the same price.
Gas buyers will go out
of their way for a bargain. It’s not uncommon for them to drive across town to
save a few cents a gallon, spending more than they end up saving. Yet there’s
no logical explanation for all stations in a certain market keeping their
prices the same. Why won’t one station set its price a nickel a gallon less than
everyone else to undercut the competition? There has to be collusion going on
between the stations to keep gas at the same price. That’s the only logical
explanation.
If one station lowers
its prices, it makes good business sense for competitors to lower theirs. But
where’s the logic in raising your prices when everyone else does?
Conway’s statement
that the state is monopolized by the Ashland refinery is false on its face.
When the city of Somerset opened its own gas station in an attempt to lower
prices in the area, it made a big deal of pointing out that the city’s station
would be buying its fuel from the recently-reopened Somerset Oil refinery. So
there are other options available, but Conway wants to pretend otherwise. It’s
easier for him to gripe about the big bad oil companies rather than looking for
true solutions.
If Conway is really
serious about lowering gas prices, here’s what he needs to do. Instead of
complaining in front of the media and filing lawsuits that won’t go anywhere,
he needs to send his investigators out into the state. Pick a town, any town,
where prices are all the same. Let his team start asking how the retailers set
their prices, and why they always raise their prices when certain competitors
do. There have been press quotes from some gas station employees saying they’ve
been told to raise their prices whenever the station across the street does so.
Wonder if they’ll say the same thing if an “unsworn falsification to
authorities” charge hangs over their heads?
But for some reason,
Conway doesn’t want to risk alienating the gas station owners. He’d rather
point fingers at a huge conglomerate and blame them instead of going after the
root of the problem. He gets headlines and makes it look like he cares about
consumers, but the reality is something totally different. If Conway wants to
protect consumers, he’ll take a serious look at collusion among retailers. He
can either eliminate it if it exists, or force them to provide a logical and
believable explanation as to why everyone in town sells gas for the same price,
and the collusion that seems so evident is really just a mirage.
