The Jersey Zone
Legislation would equalize gas prices
Published in CSP Daily News
SUMMIT, N.J. -- Pending legislation in New Jersey would equalize gasoline costs around the state, according to a report in the Recorder Newspapers. The proposal has the support of retailers, the report said, but it is meeting stiff opposition from oil companies.
Zone pricing has long been opposed by station owners, who say they cannot compete with stations charging less in nearby zones, said the report. Owners said the result is lower profits for them and that consumers either pay higher prices or have to drive further for less costly gasoline.
Spokespersons for the oil companies, however, say gasoline prices are a factor of a free economy and are no different than other commodities like food or clothing, where prices differ according to economic region. The bottom line is that if your product is not competitively priced, it won't sell, said James Benton, a lobbyist with the New Jersey Petroleum Council.
State Assemblyman Jon Bramnick (R) has proposed a bill (A621) that would abolish zone pricing and require wholesalers to charge the same amount around the state. The bill is currently being considered in the Assembly Consumer Affairs Committee, the report said.
The oil industry suggests that zone pricing is used to meet competition', Bramnick said in a statement. I have proposed, through legislation, that zone pricing is terminated. Zone pricing is not consumer friendly, but rather costs the consumer more money.
Bramnick said suburban stations pay more for wholesale gasoline than urban and certain highway stations.
The meet the competition' basis for zone pricing has no logical basis and it is time for the law to be eliminated, Bramnick said.
He said the oil companies are paying the same for gasoline that they then wholesale whether it is in Camden or in Summit. The oil companies should not be permitted to charge different rates to the retailers, he said. Why should citizens of Summit pay an extra five to 10-cents a gallon simply because of where they live? said Bramnick.
As an example, Bramnick said Summit is in one zone set by Exxon while nearby Plainfield is in another zone, where prices are lower. He said the Summit dealer pays more for his gas and he cannot compete with the Plainfield dealer. If I, as a dealer, want to be competitive, I'll lose money because the station in Plainfield buys it for less, he said.
Bramnick said past efforts to rein in zone pricing have failed in New Jersey and around the nation. The reason is the strength of the oil lobby in Trenton and nationwide, he claimed.
They are a very strong effective and important business in the state, Bramnick said. The oil companies have a long time relationship in Trenton. People who have been supportive of oil companies won't change because I come up with an idea that makes sense.
Jeff O'Connor, owner of an Exxon station in Summit, testified in the spring in favor of the bill before the Assembly Consumer Affairs Committee, said the report. He said zone pricing has historically resulted in cheaper gasoline costs in southern New Jersey than in the northern section. Part of the reason is that southern retailers have to compete with the lower costs of gas in nearby Pennsylvania.
O'Connor said Exxon has 170 different price zones. He said he has been paying a nickel a gallon more for gasoline for 20 years than the Exxon in a different zone, a mile away on Route 22 in Plainfield. According to O'Connor, the oil companies can make more profits through zone pricing by boosting costs in more affluent areas. Basically, they turned it into a way to suck as much profit as they can out of every station, said O'Connor. They charge as much as they can at any location.
He added, The fact that the oil companies hate [Bramnick's] bill means it's probably good for the people.
Benton said consumers pay more to go to the movies in more affluent communities like Chester or to buy food in places like Bernardsville. The same business approach applies to gasoline, he said. Suppliers work with retailers to price products competitively at the point of sale, Benton said. He added that wholesale costs are based on many factors, ranging from local property taxes to advertising campaigns to costs to meet expensive environmental regulations. But Benton said retailers ultimately set the price at the pumps. The upshot of zone pricing, he said, is that gasoline prices are lower in New Jersey than elsewhere around the nation.
We think zone pricing works in the best interests of New Jersey, Benton said.
John Felmy, chief economist with the American Petroleum Institute (API), told the newspaper that price controls resulted in higher costs and the long gasoline lines of the 1970s. When you start fooling with the price system, you will get perilously close to regulations that caused the gas lines, he said. Dealers hate the [zone pricing] system, but many analysts say if you change the system, it won't benefit the consumers.
While zone pricing is cited by some dealers as causing higher prices at the pumps, the overall costs of gasoline are subject to variables that can change practically from moment to moment, the report said.
The consumer wins if the market place works the way it is supposed to, Pam Fischer, spokesperson for the New Jersey Automobile Club, told the paper. But oil is a commodity and you have all these conditions that affect the price of gas, from elections in Iran to politics in Venezuela.