Two N.Y. Retailers Fined for Gasoline-Price Gouging

Published in CSP Daily News

State's "comprehensive review" finds little manipulation

ALBANY, N.Y. -- New York Attorney General Eric T. Schneiderman announced the results of his 2011 comprehensive review of gasoline prices across the state. The review, which was initiated earlier this year and stretched across several months, was part of an effort to examine how prices are determined at various levels and to protect New Yorkers from gas-price gouging.

The review, which escalated in the aftermath of Tropical Storm Irene, resulted in two enforcement actions by the Attorney General against retailers in Yonkers and Farmingdale, Long Island.

"I am committed to protecting consumers against gasoline price gouging and will continue to monitor and closely scrutinize gasoline prices in New York State," Schneiderman said. "When there are clear violations of the price-gouging law, my office will not hesitate to take action and hold violators accountable, and we have done so this year."

In late August, Schneiderman, mindful of the fact that price gouging has occurred following catastrophic weather-related events such as ice storms, wind storms and hurricanes, issued a stern warning to vendors as Tropical Storm Irene was bearing down on New York. Vendors were warned against charging unconscionably excessive prices for essential items such as gasoline, food, water, generators, batteries and flashlights.

As is turned out, some gouging did occur during Tropical Storm Irene, according to Schneiderman’s office. The Attorney General's office is looking closely at pricing data in its ongoing investigation and has already taken enforcement action against two gas stations that were found to be charging "unconscionably excessive" prices.

The first action was taken against JW Station Corp. (dba Gulf Gas Station) in Farmingdale, N.Y. Before the storm, the gas station was selling unleaded gasoline at $4.05 per gallon. However, over the course of two days during Tropical Storm Irene, the station sold gas for $4.89 per gallon. The station will pay $3,061.74 in civil penalties and costs.

The second action was taken against Parmod Food Mart, Inc. (dba Ultimate Quality Food and Fuel Mart and Parmod Pitt Stop) in Yonkers, N.Y. Before the storm, the gas station was selling unleaded gasoline at $3.82 per gallon. Over the course of two days during Tropical Storm Irene, the station sold gas for $4.79 per gallon. The station will pay $7,500 in civil penalties and costs.

In March 2011, in response to consumer complaints and in an effort to understand why prices rose so rapidly, the Attorney General's office launched a comprehensive review of gasoline prices in New York State. The goal was to determine whether gas prices accurately reflected market conditions, or if there were unjustifiable price increases.

The review looked closely into possible gasoline price gouging when gas prices increased as unrest spread throughout the oil-rich Middle East. While the results showed that the threatened disruption of the world oil market did not lead to price gouging in New York, the study revealed three key findings:

When gas prices surged past $4 per gallon for regular unleaded in the Spring of 2011, price gouging in violation of General Business Law was not the reason. Instead, analysis showed that gasoline price increases were primarily driven by changes in the price of crude oil, not actions taken by gasoline retailers or wholesalers.

Gas-price gouging did occur during Tropical Storm Irene in August 2011, and the Attorney General has taken enforcement action against several retailers.

Zone pricing is prohibited by General Business Law. but several flaws in the statute preclude effective enforcement. The Attorney General has offered recommendations to fix the statute.

The Attorney General's office requested detailed wholesale and retail pricing information from gas stations across the state. For the period from Feb. 1 to April 1, 2011, the stations provided the daily prices they paid for gasoline on the wholesale market, and the prices they charged consumers at the pump. Analyzing this data enabled the Attorney General's office to determine whether the gas stations engaged in price gouging by charging "unconscionably excessive prices," or whether the stations were merely passing along increased wholesale costs.