Jul 14, 2008 6:37 pm US/Eastern
WJZ Answers Consumer Questions On High Gas Prices
BALTIMORE (WJZ) ―
Everyone has questions and concerns over the skyrocketing cost of gas. That's why
WJZ asked viewers to email us their gas questions.
WJZ took those questions to the experts looking for some answers.
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Every time the news channels report that the gas prices are going to rise or a high up official says the prices will rise, the NEXT day the prices are up. It seems like the station owners are raising prices when they hear those reports and don't lower prices quickly. My question is: Why are prices raised day by day and not when the stations receive another delivery? That means we are paying more for gas that the station owners have already bought.PJ Severn, Md.The Maryland Gas Retailers Association says it may appear that way but station owners typically only raise their prices when their own cost of the product (the wholesale price) goes up. They also have to pay for delivery in 24-48 hours and if the price increase is substantial they have to raise the price to pay for the next delivery.
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As I traveled to Ocean City, I couldn't help but wonder why gas was five cents cheaper on our way there than it was in Glen Burnie. Why can't gas prices be the same all over?Peggy
Glen Burnie, Md.
The Maryland Gas Retailers Association says that gas prices between Glen Burnie and Ocean City are different for two reasons. The first is something called zone pricing. Gas wholesalers divide geographic areas into "zones." Depending on which zone you're in, gas suppliers charge more or less. Also, two kinds of gas are sold in Maryland, conventional and reformulated. Reformulated gas is the cleaner, more expensive type of fuel, and that's what we buy around here. The Clean Air Act requires most Maryland counties, including Baltimore City and Baltimore County, to sell reformulated gas. Depending on the market, that cleaner fuel can cost you five to 40 cents more a gallon.
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I heard the answer to the question as to why gas prices were five cents a gallon difference between the Eastern Shore and Ocean City. Something about gas zone.. and I can understand reformulated gas versus conventional gas. But what about prices between two capitals in their respective counties 15 miles apart on an east west line? Case in point, I could buy gas from Exxon in Easton, Md. for $3.89 a gallon on the same day I can buy a gallon of gas from Exxon in Denton, Md. for $3.99 a gallon. Presumably they would be in the same gas zone, both are in rural area towns. Is greed raising its ugly head here in Denton?
Kenneth Pryor
Denton, Md.
The Maryland Gas Retailers Association says you shouldn't assume the two stations are in the same zone. Different zones give suppliers the ability to set up arbitrary price. This is exactly why the Maryland Retailers Association has a real conflict with zone pricing. Consumers think one dealer is greedy when in reality he is paying .08 -.10 cents more for the exact same product.
AAA says there are several factors that impact the price of gasoline at stations across Maryland and even for gas stations that are within a few miles of each other. These include a gas station's operating costs and delivery costs for the gas. Also, competition plays a factor in pricing. For example, when there are fewer gas stations in a locality versus another larger area with more stations, there is less competition and gas stations tend to to charge higher prices. In a larger locality with an abundance of gas stations, there is more competition among the stations for a motorist's business so the stations strive to keep their prices low.
Two other factors affecting the price of gas are Zone Pricing and Below-Cost Pricing. Zone Pricing is a practice by oil companies in which they sell their gas to dealers at different prices because the companies know what the market can bear at these stations. This is an issue that has come to the attention of the Maryland Comptroller's office as these oil companies are using certain criteria that they are keeping secret to determine their prices to different retailers.
Below-Cost Pricing is a law in Maryland that prohibits a retail service station from selling gas "below cost," which would allow stations to be more competitive in their pricing. Below-Cost pricing is defined as the average "rack" reseller price determined by the Oil Price Information Service. Attempts to repeal the law have been made by legislators but failed during Maryland's legislative session.
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If a hurricane should occur over the summer, how high could gas prices go? How long could the gas price crisis last?
Dan Brown, Md.
The Maryland Gas Retailers Association says how high the price would go would depend on how much of the supply was affected. The real problem is whether or not we would be able to get any gas. The industry was very fortunate in this area when things were very dicey.
AAA says it is impossible to predict how high gas prices could rise should a hurricane occur over the summer. It would depend on where the hurricane occurs and if any oil refineries suffer any damage or need to stop production temporarily as a result of the hurricane, which happened when Hurricane Katrina hit the Gulf Coast region in 2005. It is also impossible to predict how long the gas price crisis could last.
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Will gas prices ever go down and if so when? I am going to be driving in less than 5 years.
Kendra
Edgewood, Md.
Paul Fiore of the Maryland Gas Retailers Association says that depends on which economist you listen to. He's heard plausible explanations that describe two scenarios. This is a bubble that will burst or equally convincing, that this is the new global community we live in with rising demand and tight supply. No one appears to know the answer to this question.
AAA sent us this response. No one has a crystal ball to predict what gas prices will do in the future. However, what we do know is that if crude oil continues to rise, gas prices will most likely continue to increase as well. This is because crude oil accounts for approximately 70% of the price for a gallon of regular unleaded gasoline.
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Gas is too high. Move closer to work.
Donald Burger
Havre de Grace, Md.
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I would like to know when the prices will go down because I haven't taken a vacation this summer because I couldn't afford to take a trip this year because of high gas prices.
Michael Parker
Baltimore, Md.
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Please tell me why one Exxon station in Elkridge has a price of $3.99 a gallon and another just a couple of miles away is $4.19? The one station has consistently kept their prices hovering around $3.96 to $3.99 a gallon over the past 5 weeks, while at the one in Lynwood has consistently raised their prices.
Dee McGinn
Howard County, Md.
The Maryland Gas Retailers Association says even though it's the same product (Exxon) the stations could be contractually obligated to buy from different suppliers. There are many channels of distribution even with the same brand.
AAA says there are several factors that impact the price of gasoline at stations even for those that carry the same brand of gasoline and are only within a few miles of each other, such as a gas station's operating costs. Additionally, competition may affect a station's pricing strategy. For example, when there are fewer gas stations in a locality versus another larger area with more stations, there is less competition and gas stations tend to charge higher prices. In a larger locality with an abundance of gas stations, there is more competition among the stations for a motorist's business so that stations strive to keep their prices low.
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