NJ Gas Price Controls Eyed by Lawmakers

June 6, 2008 7:40:04 AM PDT
As gas prices soar, attention is turning to state-mandated price controls critics claim hurt consumers. Nineteen states bar retailers from selling gas for less than what they paid for it from suppliers.

One of the states, New Jersey, is considering abolishing its Depression-era law, but independent gas stations contend it would help larger companies drive smaller ones out of business.

"It will not reduce the price of gasoline," said Nick Kambitsis, owner of Raceway Petroleum gas stations throughout New Jersey.

New Jersey's law was adopted in 1938 to prevent gas companies from undercutting competitors to try to gain a monopoly on fuel sales.

"It is time for state gas pricing laws to catch up to speed with the times," said Assemblyman John Burzichelli, who is sponsoring the bill to get rid of the gas price regulation.

Burzichelli also noted service stations with convenience stores or repair shops make their most money from those services, not gasoline sales. He said allowing gasoline to be priced below cost would allow stations to lower prices to attract more customers for those services.

"Gasoline is one of the only products for which a state can actually tell a merchant their price is too low and force them to hike-up costs on the consumer," said Burzichelli, D-Gloucester. "Consumers aren't told they have to spend a minimum amount on their own cars. They shouldn't be told that a gallon of gas is priced too low."

Bill Bush, an American Petroleum Institute spokesman, said Alabama, Arkansas, Colorado, Florida, Georgia, Maine, Massachusetts, Michigan, Missouri, Montana, New Jersey, New York, North Carolina, South Carolina, Tennessee, Utah, West Virginia, Wisconsin and Wyoming bar retailers from selling gas below cost.

But Kambitsis said retailers only make 8 to 10 cents per gallon off gas they sell. He and Brad Tracy, who owns a Speedway Service Station in Landing, said changing the law would destroy independent gas stations.

They said huge retailers and gas stations owned by oil companies would sell gas cheaper than they ever could.

"That will essentially make me out of business," Kambitsis said.

Tracy said he understands consumer concerns, but said, "Once the competition is gone, there's nothing to stop those big companies from raising their price."

Sal Risalvato of the New Jersey Gasoline-Convenience-Automotive Association, which represents 1,500 small businesses such as gas stations, said changing the law would create "a bloodbath for the people in my business."

"The only reason to price below cost is to be predatory in nature," he said.

The bill has been released by an Assembly committee, but many legislators remain doubtful. Assemblyman Jon Bramnick, R-Union, decried how smaller businesses have been swallowed up by big-box retailers.

"Some of the humanity is lost in our society," he said.

He also said New Jersey's system seems to be working "fairly well."

New Jersey's average gas price is $3.88 per gallon, compared to a $3.99 nationally.

"Our price is competitive compared to the other states," Bramnick said.

But Jim Benton, of the New Jersey Petroleum Council, which represents companies such as Shell, Exxon-Mobil and Hess, said that's because the state has the nation's third-lowest gas tax. The council supports changing the law.

"A seller has a right to competitively price a product to try to meet their consumer's needs," Benton said.

As a marketplace changes, he said, some retailers may go out of business, but he also emphasized, "No one can sell indefinitely below cost."

Burzichelli plans to continue pushing the bill, but said he won't let the bill receive a final vote until concerns by small stations are eased.

"We're not trying to hurt businesses in New Jersey or consumers," said Assemblywoman Nilsa Cruz-Perez, D-Camden, the Assembly consumer affairs chairwoman. "We're trying to help each other."