Michigan Lawmakers Propose Fuel Caps
DETROIT -- The Memorial Day weekend usually brings along a higher price in gas prices, but it could be for the last time in Michigan. Responding to the growing problem of large chains driving out independent stations by setting prices below wholesale cost, state lawmakers today will unveil legislation to regulate the industry.
A bipartisan group of lawmakers are sponsoring the bills, which create a pricing window in which gas costs must fall, according to the Detroit Free Press. The bills prohibit retailers from selling below or too far above wholesale cost to prevent both predatory pricing and price gouging.
"This is really about protecting consumers by making sure there's competition, and making sure prices don't get too high," said state Sen. Mark Schauer (D-Battle Creek). "Hopefully, it will prevent the price spikes that happen every weekend and holiday."
Twenty-five representatives, almost a quarter of the House, and 10 of 38 senators from both parties have signed onto the bills, which are similar to those in about 20 other states. Gov. Jennifer Granholm, who targeted several stations statewide for price gouging after the terrorist attacks of Sept. 11, 2001, has not yet reviewed the bills, the report said.
The bills have the support of the Michigan Petroleum Association, Michigan Association of Convenience Stores and the Service Station Dealers Association. Those groups say price controls are needed to stop large chain retailers from forcing small, independent stations out of business. They say the large retailers are setting prices below wholesale to drive out competition. Once the small stations close, the larger ones raise prices, said Mark Griffin, president of the petroleum and convenience stores associations.
"The consumer is going to lose," Griffin said. "There would be no competition. When that competition is not there, what incentive is there to keep prices low?"
Ateeq Alhumaidi of Lansing found that out the hard way. Six months after buying two Shell stations in Lansing, he went out of business in March. "A lot of times, we went by for weeks and made no money," he said.
Randy Markham said he has been losing so much money he might have to close one of his three Lansing, Mich. stations. "The public is winning in terms of the price war, but as the small guys leave the prices of gas will go up because of less competition," he said.
On Wednesday, Markham charged $1.51 for unleaded gas at his Amoco and two Sunoco stations. That's 4 cents above the $1.47 wholesale cost but below the profitable price of $1.57.He claimed he has to charge $1.51 to stay close to his competitors but if his gas cost $1.57, customers could go elsewhere. "If we don't stay competitive, we lose our customers,'' he said. "If we stay competitive, we lose our shirts."
Similar legislation has found opposition in other states. Hawaii lawmakers passed a bill last year capping the price of gasoline, but it has yet to go into effect. Matthew Brown, energy program director for the National Conference of State Legislatures, is conducting a study on the feasibility of the law before it is implemented, the report said.
AT A GLANCE:
Legislation unveiled in Michigan by a bipartisan coalition of state senators and representatives would give independent gasoline retailers price protection against major fuel sellers trying to force out competition. Here's what the Michigan Petroleum Marketing Stabilization Act would do:
* Prohibit under-pricing: Retailers could not sell gasoline below wholesale price, a practice called predatory pricing used to drive out competition.
* Limit over-pricing: Retailers could not charge more than three times their overhead costs. Generally, that comes out to about 8 percent above wholesale.
A bipartisan group of lawmakers are sponsoring the bills, which create a pricing window in which gas costs must fall, according to the Detroit Free Press. The bills prohibit retailers from selling below or too far above wholesale cost to prevent both predatory pricing and price gouging.
"This is really about protecting consumers by making sure there's competition, and making sure prices don't get too high," said state Sen. Mark Schauer (D-Battle Creek). "Hopefully, it will prevent the price spikes that happen every weekend and holiday."
Twenty-five representatives, almost a quarter of the House, and 10 of 38 senators from both parties have signed onto the bills, which are similar to those in about 20 other states. Gov. Jennifer Granholm, who targeted several stations statewide for price gouging after the terrorist attacks of Sept. 11, 2001, has not yet reviewed the bills, the report said.
The bills have the support of the Michigan Petroleum Association, Michigan Association of Convenience Stores and the Service Station Dealers Association. Those groups say price controls are needed to stop large chain retailers from forcing small, independent stations out of business. They say the large retailers are setting prices below wholesale to drive out competition. Once the small stations close, the larger ones raise prices, said Mark Griffin, president of the petroleum and convenience stores associations.
"The consumer is going to lose," Griffin said. "There would be no competition. When that competition is not there, what incentive is there to keep prices low?"
Ateeq Alhumaidi of Lansing found that out the hard way. Six months after buying two Shell stations in Lansing, he went out of business in March. "A lot of times, we went by for weeks and made no money," he said.
Randy Markham said he has been losing so much money he might have to close one of his three Lansing, Mich. stations. "The public is winning in terms of the price war, but as the small guys leave the prices of gas will go up because of less competition," he said.
On Wednesday, Markham charged $1.51 for unleaded gas at his Amoco and two Sunoco stations. That's 4 cents above the $1.47 wholesale cost but below the profitable price of $1.57.He claimed he has to charge $1.51 to stay close to his competitors but if his gas cost $1.57, customers could go elsewhere. "If we don't stay competitive, we lose our customers,'' he said. "If we stay competitive, we lose our shirts."
Similar legislation has found opposition in other states. Hawaii lawmakers passed a bill last year capping the price of gasoline, but it has yet to go into effect. Matthew Brown, energy program director for the National Conference of State Legislatures, is conducting a study on the feasibility of the law before it is implemented, the report said.
AT A GLANCE:
Legislation unveiled in Michigan by a bipartisan coalition of state senators and representatives would give independent gasoline retailers price protection against major fuel sellers trying to force out competition. Here's what the Michigan Petroleum Marketing Stabilization Act would do:
* Prohibit under-pricing: Retailers could not sell gasoline below wholesale price, a practice called predatory pricing used to drive out competition.
* Limit over-pricing: Retailers could not charge more than three times their overhead costs. Generally, that comes out to about 8 percent above wholesale.