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Fighting Gas Pricing Scam

Posted on 21 November 2008

This coming Monday, November 24, the jig is up in New York State on zone pricing of gasoline—a scam that has especially impacted motorists on the East End.

Zone pricing is a marketing practice of the oil industry under which gas stations in various geographic areas are charged different wholesale prices. The oil industry figures that in certain zones, people have a lot of money—so it can hit them with gas at a higher price.

Although the new law is to take effect in days, the industry was sticking with its old trick last week. On Friday, driving past Medford, then through Riverhead and then Flanders, gas was $2.29 to $2.35 a gallon. But then, when I got to Shinnecock Hills, the cheapest was $2.69 a gallon.

The oil industry line through the years about prices on the East End was that they simply reflected the additional transportation costs of trucking gas east.

Typical oil industry baloney. The last $2.29-a-gallon station I passed in Flanders was 8.5 miles from the first $2.69-a-gallon station in Shinnecock Hills. Does 8.5 miles justify a 15 percent price differential?

Up in Connecticut a decade ago, the state’s Office of Legislative Research conducted an investigation into zone pricing of gas and got an oil industry admission that there were “46 such zones in Connecticut.” Repeatedly introduced in Connecticut has been a similar bill to the one passed in New York.  It’s been passing in the Connecticut Senate but not House. Last year, again “proponents said the ban could lower prices at the pump,” relates the website of the Advocate newspapers in Connecticut. “But opponents cited a $40,000 Quinnipiac University study, funded by oil industry lobbyists, which concluded the ban would hike prices.” Funded by oil industry lobbyists!

I called Connecticut Governor M. Jodi Rell’s office and was told she still wants a ban on zone pricing of gas—but the House roadblock remains a big problem.

How did such a bill pass in New York State?

State Assemblyman Fred W. Thiele, Jr. of Sag Harbor who has championed a New York prohibition on zone pricing of gas for more than 10 years gives this explanation: “I don’t want to say that there was a silver lining to the dark cloud of high gas prices, but with gas over $4.50 a gallon this summer, the amount of leverage the oil industry had on the political parties was substantially reduced. People were upset over gas prices. And it was an election year. So the major oil companies this year were unable to stop it. The stars lined up.”

It’s no toothless statute: the penalty for violating the law and engaging in zone pricing of gas carries a hefty penalty. The gas wholesaler is subject to a fine of up to “$10,000 for each violation,” says the bill signed into law by Governor David Paterson.

Mr. Thiele says he expects New York’s active Attorney General Andrew Cuomo will be “vigorous in enforcement.” Also, he welcomes any person who as of Monday notices “disparities in gas prices” which smack of zone pricing to contact his office.

As to how the oil industry manipulates the New York State Legislature, Mr. Thiele said it operates “behind-the-scenes” with “campaign contributions” the key tool.

Another measure involving the oil industry recently passed by the New York State Legislature and signed into law by Governor Paterson—beating oil industry pressure with the same configuration of political stars, says Mr. Thiele—is one that ends a restriction on the owner of a gas station affiliated with a major oil company “from going out on the spot market and buying unbranded gasoline,” the assemblyman explains.

This bill, which hasn’t gotten much notice, thus allows the gas station owner to buy cheaper gas and separately sell it as long as it’s identified as “unbranded.” Mr. Thiele was a co-sponsor of this new law, too.

Tyranny of Oil: The World’s Most Powerful Industry—and What We Must Do to Stop It by Antonia Juhasz is a fine new book about the oil industry.  She writes about the destructive impacts of the oil industry including to the environment and democracy.

Zone pricing and limiting gas station owners on what they sell are among many shady oil industry devices—these, at long last, are being stopped in New York State.

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