Price gouging at the pump frustrates frugal motorists
A gasoline "price crisis" now has supplanted the "supply crisis" of a year ago, says a top oil-industry economist. Assuming there are no substantial new cutbacks in Mideast oil production, gasoline supplies will remain abundant, says John Lichtblau, director of the Petroleum Industry Research Foundation, an independent industry think tank funded by the major oil companies.
But many a beleaguered -- and confused -- motorist still sees rising gasoline prices at the pump -- at a time when supplies are brimming over and long-term demand is declining.
While many gasoline retailers nationwide are responding to the gas surplus with lower prices due to the competition for customers, in some areas prices have remained high or even risen. Why? The most immediate cause of concern is that price gouging, rather than quietly fading away with the return of plentiful gas, has increased in many parts of the United States, according to Department of Energy officials.
"It's hard for the consumer to realize that when you have supply up and demand down you have prices up," Mr. Lichtblau told the Monitor. "But we're conserving gasoline not to bring the price down; we're conserving it as a reaction to high prices. People who are buying gasoline at $1.30 a gallon will buy less."
Gasoline prices in many areas of the nation have nearly doubled from an average of 69.8 cents a gallon for all grades in January 1979, according to US Department of Energy surveys. Some economists forecast some prices for premium grades of gasoline will hit $2.00 a gallon by early next year despite a temporary drop in prices in some areas.
In regions experiencing steep price hikes, Mr. Lichtblau and other oil industry sources say there are legitimate in most cases. These include the steady increases in the price of crude oil sold by the Organization of Petroleum Exporting Countries -- more than 50 percent of the price of gasoline is the price of crude oil -- coupled with the continuing phased decontrol of domestic crude oil prices and higher labor and other production costs.
But even now the price of gasoline at many stations across the US is artifically -- and illegally -- high, says Gordon Harvey, deputy assistant administrator for enforcement for the US Department of Energy (DOE).
Nationwide, from Aug. 31, 1979, through March 1, 1980, the enforcement division of DOE audited the books of 27,000 of the nation's more than 160,000 retail gasoline dealers. One out of every five, about 5,400 stations, "were in violation" of federal price ceiling regulations, Mr. Harvey says. In New York City alone, 286 of 576 stations were found to be violating the regulations -- and overcharging motorists.
Federal regulations limit the price a retail gasoline dealer can charge above the wholesale price. On Dec. 15 of last year, this profit margin was increased from 15.4 cents a gallon to 16.1 cents a gallon.
In the last few months, Mr. Harvey reports, violations of these ceilings have been numerous in New York, southern Florida, and metropolitan Los Angeles.
Spokesmen for the Service Station Dealers of America, representing some 60, 000 dealers across the country, say the regulations are confusing and many dealers with higher-than-legal prices are not willfully violating the law.
But Mr. Harvey says that the regulations have been around long enough that there is really no excuse for overcharging motorists.
In Miami, one out of every two stations surveyed in March was overcharging motorists. Mr. Harvey says the increase may be due in part to some dealers taking illegal advantage of increased Florida travel by motorists on late winter vacations.
In New York City during the month of March, 24 out of 34 stations audited were overchargin -- a sharp rise from previous months. Mr. Harvey could not pinpoint a reason for the increase here.
In one state, Maryland, a sharp decrease in price overcharging is expected as a new state program gets under way. The Maryland effort, run by the comptroller of the state, monitors gasoline prices even before the federal government steps in. State "grease berets" fan out into all corners of the state to survey prices.Because station owners know there is so much manpower being devoted to audits, Mr. Harvey says, it should keep the lid on overcharging. If the program succeeds, it is likely to be tried elsewhere.