Fuel price schizophrenia sweeps nation

| 9/13/2001

If you were eyeballing fuel prices on Tuesday, you likely witnessed the mass schizophrenia that caused many retailers to get a bit crazy with their prices, while others remained calm and steady. Following the attacks on New York City and Washington, DC, there appeared to be no immediate threat to world oil supplies but fears of a fuel shortage, reports of refinery lockdowns and pipeline shutdowns caused much uncertainty.

OOIDA reported that its members were contacting the association with reports of huge increases in the price of fuel at many fuel stops. Many witnessed 20-40 cent price increases as they waited to fuel up.

According to ProMiles, the average cost of diesel per gallon went up 12 cents overnight in Arizona to $1.687; up 5 cents in California to $1.724; up 11 cents in Arkansas to $1.531; up 11 cents in Illinois to $1.785; up 9 cents in Michigan to $1.655; up 11 cents in Missouri to $1.60; up 15 cents in Montana to $1.724; up 15 cents in New York to $1.688; up 20 cents in Oklahoma to $1.675; up 9 cents in Tennessee to $1.493; up 11 cents in Virginia to $1.425.

Sen. Kent Conrad (D-ND) said the rising prices across the country were discussed at a Senate briefing Tuesday night, and that Congress could take action soon to stop price gouging. "That's the last thing that should be happening," Conrad said.

Oil industry group the American Petroleum Institute on Wednesday denounced price gouging. "API and its members do not condone and, in fact, strongly denounce any attempt to use this crisis to take advantage of consumers," it said in a statement.

What are the oil companies saying?
The American Petroleum Institute, an industry trade group, issued a statement reassuring motorists that there is no threat of a fuel shortage. "Fuels are flowing normally to wholesale and retail markets throughout the United States," said the institute, adding that gasoline and diesel fuel inventories "are adequate to meet demand."

In response to the attacks, the Organization of Petroleum Exporting Countries said it would increase production if needed to keep prices stable. Ali Rodriguez, secretary-general of OPEC, said that the Arab-dominated cartel would ensure world oil supplies and price stability. "OPEC member countries are committed to their promises to guarantee sufficient oil supplies and their policy of strengthening market stability," Rodriguez said after the attacks. He also said OPEC countries had substantial spare production capacity and were prepared to use it in order to achieve their goals.

Michael Lynch, a chief energy economist at DRI-WEFA Inc., said oil is likely to stay well above $30 a barrel for as long as uncertainty looms about who was responsible for the attacks and what the United States' response will be. "The tragic terrorist attacks in the U.S. (Tuesday) will no doubt sow confusion and panic in oil markets, causing a brief spike over the next few days of $35 or so," Lynch told CBS MarketWatch. He said as long as the industry is uncertain whether U.S. retaliation will be against an oil-exporting country such as Iraq, companies will tend to protect themselves in case supplies are disrupted. "This should keep prices above $30 for an extended period of time," Lynch said.

ExxonMobil and BP officials said supplies would not be hampered, and announced they have frozen their prices and pledged to keep distribution steady. "We are asking all of our customers to maintain their normal buying habits," an Exxon Mobil spokesman said. "We have ample supplies. We're trying to avoid an artificial shortage."

But the company added that it has no control of stores operated by independent dealers and distributors. Less than 1,000 of the 16,000 Exxon and Mobil-branded stations are owned and operated by ExxonMobil.

Likewise, Equilon Enterprises and Motiva Enterprises, the companies who market Shell and Texaco fuel, issued their own statement pledging to "hold gasoline and diesel fuel prices steady for the next couple days." They added this price hold applies to Shell and Texaco stations owned and operated by the company, as well as the retail and wholesale prices charged to independent dealers and wholesalers in the United States.

Unfortunately, efforts to curb price gouging seemed to have little immediate impact. Truckdrivers and four-wheelers reported random spikes later Tuesday of up to $3-$5 per gallon for gasoline and up to $2 per gallon for diesel. Some believe independent store owners and operators are taking advantage of consumers during a national crisis by raising prices to increase their profits.

Authorities in Missouri and Oklahoma are already investigating instances of price-gouging, while Mississippi's attorney general, Mike Moore, asked Gov. Ronnie Musgrove to declare a state of emergency, which would allow prosecutors to pursue price-gougers there.

Getting gouged? What can you do about it?
OOIDA's Gary Green says the large companies inability to control independent retailers is a large part of the problem. "We have contacted some of the wholesale suppliers and asked if there were any increases at the wholesale level," says Green. "Chris Conway of Conoco told us the wholesale prices are not moving. He said it's possible that there are some independent dealers out there that are doing things that aren't appropriate."

According to Green, Conway said that in Conoco's case, the company has not moved the price at all at the wholesale level and he said he believes that's generally true for the industry. He went on to explain, "What people, I think, sometimes overlook, is that many of the service stations are independently owned. They are not owned by the oil companies and they have free rein to do whatever they want."

"The increase of fuel prices made by these independent retailers is made on an individual level and contrary to their claims, it is not due to any real increase they are experiencing from their suppliers," said Green. "As a member, you can do something about the unethical actions of these fuel stops by buying just enough fuel to obtain a receipt. Then you need to contact the state Attorney General's Office, Consumer Affairs Division, in the state where the purchase was made. You'll need to follow up by filing a written complaint along with supporting documents with the AG's office and request that they respond to you in writing acknowledging your complaint and advising what recourse will be taken."

Green says this is just a small step truckers can take to help protect others in the industry from practices currently taking place. "This is the time to prove that we are the moving force of the United States and will not stand for un-American or unethical practices," he says.