Below $2.00 Is Back

Gasoline retailers bringing out "1s" again in parts of U.S., but gouging charges persist

Published in CSP Daily News

JOPLIN, Mo.-- Gasoline prices have fallen below $2 a gallon in some parts of the country as the impact of plunging oil prices and reduced driving are finally taking hold, reported the Associated Press. But despite price declines nationwide, a disparity on the Kansas-Missouri border is prompting allegations of gouging.

The national average for a gallon of regular fell three cents overnight to $2.668, according to auto club AAA, the Oil Price Information Service and Wright Express. That's roughly a dollar less than what was paid just a month ago and 18 cents below year-ago prices. Only three [image-nocss] states—Alaska, California and Hawaii—have average prices for regular grade above $3 a gallon, AAA said.

Gasoline prices have been sliding as oil prices have dropped to the lowest level in more than a year, dipping below $62 a barrel at one point Monday. Oil prices have plunged 57% from a record $147.27 on July 11.

Oil trader and analyst Stephen Schor said the national average for gasoline could reach $2.25 a gallon in the coming weeks. "We have to appreciate what extraordinary circumstances we're now dealing with," he said. "We've had a major correction in the price of crude oil, and that correction is having a knockout effect on gasoline prices. This great unraveling that we're seeing in all commodity prices is exaggerating the seasonality of this market."

The rise and fall of fuel prices has had an effect on Americans' driving habits. From last November through August, Americans drove 78.1 billion fewer miles than they did over the same 10-month period a year earlier, according to data from the Transportation Department.

Despite the price decline, however, some retailers say gasoline sales are down on weekends by as much as 10% from a year ago—a sign that some are driving only when necessary. "I think the mentality of the consumer is, 'Yes, it's nice to have $2.50 gasoline, but I feel much poorer today than I did when it was $4 a gallon'," said Ben Brockwell, director of data, pricing and information services for the Oil Price Information Service. "I think people are still in a money-saving mode."

Prices below $2 per gallon have begun cropping up, predominantly in the Plains and parts of the Midwest. In Ohio, the website GasBuddy.com, where consumers post prices they spot, said a few stations in the Cincinnati suburbs were now charging $1.99 for regular. On Monday, "more than a handful" of stations in Fairfield and Hamilton, Ohio, were offering 87 octane fuel for $1.99 a gallon, said The Hamilton Journal News.

The Oklahoman reported yesterday that gasoline prices fell to less than $2 a gallon at numerous Oklahoma City stations as the overall citywide average continued to decline.

A gallon of regular gasoline fell to $1.97 at some locations in Joplin, Mo., on Monday, said The Joplin Globe.

John Buchanan, an analyst with the Missouri Energy Center, told the newspaper, "I'm not bit a surprised by the decline in prices, but how much further it will go is really hard to predict. The answer to that is there is no bottom in sight."

The reduction in the cost of fuel should act like an economic stimulus package, but it is not, added Mike Right, with AAA of Missouri. "The decline in demand in the United States is now in its 10th consecutive month. This started back in 2007," he told the paper. "Before, it would go down for a month and then come back. We expect this decline in demand to continue for the rest of this year. You would think that a lower price for gasoline would stimulate more driving. But nobody's going out joyriding. Instead, people are holding back. They're dealing with rising food costs, and anxiety over the stock market, unemployment and credit. There's an awful lot of anxiety out there, and people are reducing expenses whenever and wherever possible."

Some gas stations around the Ozarks are selling regular unleaded for less than $2 a gallon, reported Ozarks First in Missouri. In Nixa the price is down to $1.96 at two locations.

Multiple stations in the Pittsburg, Kansas, area a half-hour east across the state line from Joplin sold gasoline for $2.39 per gallon on Monday, said The Pittsburg Morning Sun. Gas prices are typically lower in Joplin than in Pittsburg due to Missouri's lower sales tax on gasoline. Missouri has a 17-cent per gallon sales tax, while Kansas has a roughly 25-cent-per-gallon sales tax on gasoline.

The Pittsburg versus Joplin gasoline price issue has long been a topic of discussion, the report said. The latest trend, however, has state and local politicians calling for an investigation into the significant cost difference. Kansas State Senator Jim Barone (D) said the issue should be thoroughly investigated by the state attorney general, Steven Six. "I think there should be a full-blown investigation," Barone said.

He said the blame for the higher prices in the Pittsburg area should not fall on individual stores, but on the companies that sell them their gasoline. "I don't suspect gouging, because gouging would take place on the retailers' side of things," Barone said. "I suspect it is the distributors who are very likely the ones causing the problem. We ought to call all of the distributors in to find out what's going on."

State Representative Julie Menghini (D) said she is often approached by concerned local residents who feel they are getting a raw deal at the pump when they compare prices to those in Joplin. "We get hit a lot with that anger over the difference in the tax," she said. "But the difference in the tax is really very small and I try to explain that to people."

Unlike Barone, Menghini said she does suspect some price gouging, but to an extent "subtle enough that people can't put their finger on it. I've had concerns about this and talked with folks before about wondering why this is, and if we're not getting a little long-term gouging," she said. "We always knew we were paying a lot more and never really understood why."

Menghini also thinks the matter should be investigated by the attorney general's office.

"Something's not right," she said.

State Rep. Bob Grant (D) also called for an investigation into why prices are often significantly higher in Pittsburg than in Joplin. "I'm not sure that the stations [in Joplin] don't drop their prices maybe a couple more cents to use as a draw to get Kansas people to come over and buy gas and then buy other things," he said.

While Grant said he understands why motorists flock toward cheaper gasoline, he added that local drivers should keep in mind where their tax dollars from gasoline are used. "The state sales tax goes to our roads, as does the federal tax," he said. "People going over there and buying cheaper gas, they think they're saving a lot. But in the long run, they're really costing themselves because all of that money is going to Missouri roads and not Kansas roads."

John Van Gorden, Pittsburg city manager, said he hopes something can be done to not only figure out why the gap is so wide, but also ways to remedy the problem. "If it's $1.99 in Joplin, I think we should be closer to that than we are right now," he told the paper. "I cannot imagine why in the world there should be this much of a difference."