Oil Companies Push Up Prices of Gas in Area

By Kaplan, Peter | The Washington Times (Washington, DC), September 1, 1996 | Go to article overview

Oil Companies Push Up Prices of Gas in Area


Kaplan, Peter, The Washington Times (Washington, DC)


****CONTRACTS WITH SUPPLIERS KEEP STATION OWNERS FROM BUYING ON THE OPEN MARKET.****

The prices at James Giles' Georgia Avenue Shell Station are too high, and Mr. Giles knows it.

Yesterday, he was asking $1.29 for a gallon of unleaded - about 18 cents more than it costs on the wholesale market and 12 cents more than a Citgo station charges only a few miles away.

Yet there's little Mr. Giles can do about it. Under an exclusive contract, he has to buy his gas from Shell Oil, and Shell charges him $1.22.

"They have control," Mr. Giles says, frustration in his voice. "They can change the numbers anytime they want to."

Mr. Giles is one of many Washington area gas station owners who are growing disillusioned with the handful of major oil companies that control the price of gasoline locally. During this year's run-up in prices, critics say, oil companies have been taking excessive profits at the expense of customers and small station operators.

"Prices are artificially high for lessee dealers - for anybody in the metro area who's buying from an oil company," said Roy Littlefield, executive director of the Washington/Maryland/Delaware Service Station and Automotive Repair Association, an organization that represents 1,500 station owners in the region. "You've really got the consumers and the dealers at a real disadvantage."

Average gasoline prices in the Washington area have fallen 7.3 cents during the last two months, according to the Automobile Association of America's Potomac Chapter. But heading into the Labor Day weekend, prices are still 11 cents higher than they were at the same time last year, and 5 cents more than the national average.

"Gas prices in the Washington metro area this year became outrageous," said Lon Anderson, a spokesman for the Automobile Association of America's Potomac Chapter, which represents about 800,000 local motorists. "I'm not sure any of the explanations I saw answer the question [why]." Oil industry analysts have blamed the run-up on unexpectedly strong worldwide demand and a bottleneck at U.S. refineries. But locally, many station owners and managers can't explain why prices have been so slow to come down.

"We're way out of line, I think," said Bob Couchenour, manager of the Bradley Boulevard Exxon station in Bethesda. "There could be an explanation, but I would have a hard time justifying the [price] difference between here and Fredericksburg, Va."

Prices in the Washington area have always been high during the summer because of the large influx of tourists, industry analysts said. And as in other major cities, gas is more expensive here because it must be oxygenated and specially formulated to comply with clean-air regulations.

To complicate matters, retail gasoline prices vary widely around the metropolitan area because the three jurisdictions charge different tax rates on gas. High real estate costs also boost prices.

"The market changes constantly," said Joseph Lastelic, a spokesman for the American Petroleum Institute. "There's competition there, and that's the thing you have to remember. . . . It's the most competitive business in the country."

Mr. Lastelic said big oil companies often are unfairly blamed when fuel costs rise, even though they don't set prices at the pump. …

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Oil Companies Push Up Prices of Gas in Area
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