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Proposed changes to gas gouging law deserve your attention

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Lawrence Wasden

I’m writing to make you aware of a piece of legislation currently working its way through the state Legislature. The bill is being pushed by Idaho’s gas retailers and, if approved, would make it easier for these businesses to price gouge during declared emergencies.

As you are likely aware, Idaho suffers from some of the highest gas prices in the nation. And by law, I have only two tools to fight unreasonably high gas prices. One prohibits businesses from colluding to set prices. The other prohibits sellers of fuel, food, water and medicine from charging “excessive or exorbitant” prices during an emergency. Senate Bill 1041 was proposed by the Idaho Petroleum Marketers & Convenience Store Association to undercut my ability to protect you from price gouging during an emergency.

So why have Idaho’s gas retailers made this a priority now? Well, there’s a backstory here. Last March, COVID-19 prompted an emergency declaration that triggered the state’s price gouging law. In the weeks that followed, oil prices fell dramatically. Gas prices at the pump, though, did not drop as quickly.

I wanted to know why. So I contacted Idaho’s three largest gas retailers — Maverik, Jacksons and Stinker Stores — and asked them to explain their pricing and remind them that Idaho’s price gouging law was in effect. They rejected my concerns and did not satisfactorily explain the pricing we were observing. My office soon initiated a formal investigation that focused on the retailers’ margins. I did so because Idaho’s current price gouging law directs that examination as a way to determine whether prices are excessive or exorbitant.

We found that during the first few weeks of the pandemic, these retailers’ margins increased dramatically. Our independently-sourced data from the last 14 years showed Idaho retailers usually make about $.10 per gallon of gas. (The gas companies contend their historical margins are closer to $.20 per gallon.) Three weeks into the pandemic, Idaho gas retailers — including the three my office investigated — were making a record margin of $.63 per gallon. This was well above the previous high of $.42 per gallon set in 2008.

While retailers could buy their gas at a steep discount, those savings, by and large, weren’t passed on to you. In fact, despite some increased costs connected to the pandemic and a reduction in their sales volumes, these inflated margins allowed the retailers’ gas profits to swell.

After presenting our findings to the retailers, my office negotiated a settlement that includes $1.5 million in credits that will go back to Idaho consumers this year. That settlement was announced on November 30. Less than two months later, the gas retailers were in front of the Idaho Legislature urging major changes to the very law that allowed my office to investigate them in the first place.

If the gas companies’ proposed changes become law, a future investigation and settlement similar to the one initiated by my office last year would no longer be possible. So far, the gas retailers’ bill has been welcomed by lawmakers. It passed unanimously in the Senate and is now headed to the House. If successful there, it could be signed into law by the governor.

It’s extremely rare that I speak publicly on the merits of a particular piece of legislation. But you deserve to know about this bill. If you believe that gas prices shouldn’t be excessive or exorbitant during an emergency, you need to contact your legislators now and let them know.

Lawrence Wasden is the attorney general of Idaho.

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One comment

  1. Our Secretary of State seems to know little about how oil markets and gasoline markets work.

    He bemoans the “high price of gasoline”. Really? Well, $.32/gal of the price is because of a State Fuel Tax.

    His major blind spot involves the universal economic law of Supply vs Demand. When demand goes up quickly relative to supply [as in a crisis], vendors can restore the balance of supply and demand by raising price. The higher price forces more price sensitive customers to delay their purchases thus lowering demand. Most importantly it deters hoarders from buying far more gasoline than they need and later selling it on a black market.

    Remember the toilet paper shortages in 2020? That shortage could have been greatly reduced if retailers had increased prices in the face of rapidly increasing demand. But they didn’t, fearing a legal backlash from the State.

    The Secretary is also oblivious to how gasoline pricing accounts for the inventory effects of gasoline. Gasoline is costed based on a last-in, first-out inventory accounting system [which is legal]. Thus, while oil prices may be falling, gasoline being sold is costed based on the cost of oil that was last purchased and is in inventory. Until that expensive oil is depleted from inventory, the cost of cheaper oil is not factored into the retail price of gasoline.

    State sponsored anti-gouging price laws do nothing but help support black markets and reward hoarders who rush to the market to hoard, while everyday consumers suffer from shortages or pay exorbitant, non-market prices, on the black market.