Pain in the Gas - Why you'll always pay more at the pump in Avon and Hartford
hartfordadvocate.com by Chris Harris - January 30, 2003
It pays to shop around, one AAA spokesman says. but legislators and the AG want zone pricing to stop.Thanks to America's oil shortage scare, propelled by curtailed oil and gas exports from Venezuela and the impending threat of a battle royale in Saddam country, gasoline prices are rising, and fast. Within the last month, Connecticut motorists have been shelling out more and more dough at the pumps -- well, some motorists maybe more than others.
Petrol prices are up, and there are no signs they'll be slowing, says Fran Mayko, an American Automobile Association spokeswoman.
According to the latest figures from AAA's daily fuel gauge, the national average has jumped almost 10 cents a gallon within the last month -- up from $1.37 to $1.47 a gallon.
Connecticut's average price is $1.59 a gallon, up from $1.55 a little more than a month ago, and $1.20 a year ago. The average price in the Hartford area was $1.58 last week. In Norwich, it was $1.53, while in the Bridgeport region, gas was priced at $1.62 a gallon.
Gasoline prices obviously fluctuate exponentially with the ebb and flow of the crude-oil market tide. But some Connecticut automobile owners are still going to end up paying more than others -- regardless of what happens, if anything, in Iraq.
Basically, market insiders tell the Advocate, it comes down to where you're living -- in essence, regional factors, based on demographics, dictate who pays what to fill 'er up, even during times of market stability.
It's a practice known as zone pricing -- a price-setting strategy used by the corporate brands to "better compete." At least that's the public spin. Zone pricing is commonplace in both affluent areas and low-income areas throughout the country and state.
The rich industry watchdogs, for instance, are targeted, as they're usually more willing to pay higher prices. Meanwhile, customers in more distressed communities are also marked for inflated prices because they're usually more isolated and less able to shop around.
Local examples of zone pricing are abundant. Last week, for instance, the Advocate passed through Avon, stopping at several service stations along the way; we found that the going rate for regular unleaded self-serve gasoline was, on average, $1.67 a gallon. On Albany Avenue in Hartford, the average rate was $1.66. In Tolland and East Hartford, not affluent nor indigent areas by any means, the average rate was $1.55.
Harry Murphy, a spokesman from the Service Station Dealers of America, a national association of service station dealers, repair facilities, car washes, and convenience stores, says each service station sets its own prices. One uncontrollable influence factors into the pricing equation more than any other."Generally, it's based on what they must pay to wholesalers," says Murphy. Stations in towns with a higher per capita income might be asked to pay more per gallon to wholesalers like Exxon and Citgo than stations in nearby, yet less affluent towns.
"They might say, 'This guy over here is in a high-income area -- we can get away with it,'" says Murphy.
When that happens, says one of the service station owners the Advocate spoke with, who asked not to be named, "we have to pass it along to our customers -- we have no choice. Otherwise, we wouldn't be in business."
Gas companies divide most states into zones and charge dealers within each zone different wholesale prices based on relative wealth, isolation and other factors. Prices are set based on what the oil companies determine each specific market will bear.
In Simsbury, explains the station owner, "we're definitely charged more" for gas. "We pay more than the rest of the state just because of where we are."
The good news? State lawmakers are trying to do something about the problem. State Attorney General Richard Blumenthal, Rep. John Wayne Fox (D-Stamford), and Rep. Christel Truglia (D-Stamford) have been vocal opponents of zone pricing, and have introduced several bills within the past few years seeking to eliminate the practice. None have become law.
"Zone pricing is invisible and insidious," Blumenthal testified during public hearings back in 2000, before the House Judiciary Committee. "It distorts the free market. The power of the major oil companies to charge inflated, excessive, arbitrary prices results from gasoline dealer franchise agreements dictating that the gasoline dealers are required to purchase products from a single supplier.
"As a result of such sole source provisions, gasoline dealers are powerless to seek or shop for a cheaper supply of gasoline," Blumenthal continued. "Hence, consumers in the higher price zones pay a higher retail price."
Blumenthal et al. will likely propose another zone pricing bill during this year's legislative session.
In the meantime, Jim McPherson, a spokesman for AAA's Hartford office, offers these words of advice: "Motorists concerned about the price of gasoline can often get good results when they shop around."
Chris Harris can be reached at charris@hartfordadvocate.com.