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June 2, 2004
Minnesota Makes Sure Drivers Don't Gouge Oil Companies

In this period of rapidly rising gasoline prices, you may feel relieved to hear that the state of Minnesota has focused on the pump prices to make sure that there are no shenanigans going on. However, that feeling might be fleeting when you find out that they're keeping prices up:

With gasoline prices painfully high, it may be surprising for some to learn that state regulators are penalizing retailers for, well, for not charging Minnesota motorists enough for gasoline.

The Commerce Department snagged its first offenders last week under a 2001 law that aims to prevent predatory pricing by requiring gas merchants to charge 8 cents more per gallon than they pay for fuel.

Arkansas-based Murphy Oil was penalized $70,000 for violating the law prohibiting below-cost sales. The company operates 10 service stations in Minnesota on property it leases from retail giant Wal-Mart.

If the oil companies got together and decided to set a bottom limit to pump pricing at eight cents over cost, both the federal and state governments would immediately file charges for price-fixing, and possibly RICO violations at the federal level. We would hear about the evil oil companies keeping their profit margins high at the expense of the poor working stiffs just trying to get to their jobs.

However, if the state does it (especially in Minnesota), it somehow ceases to be bad for consumers. Suddenly, price-fixing protects consumers, even though the mechanism and the result is the same. State officials claim that the law allows small operators to compete with big (evil) oil (evil) corporations (evil) by restraining loss-leader prices that might drive Mom & Pop Petroleum out of business. Minnesota state officials must live in a time warp, though; when I drive across the metro every day, all I see are Super America, Holiday, Phillips/Conoco, BP, and Fina fuel stations, every single one of them outlets of the biggest players in the oil market. Occasionally I see a Mobil or Texaco station, but Mom & Pop seem to have retired and moved to the Caymans.

The most ludicrous part of the story is that the operator receiving the largest fine is Murphy's Oil, which comes a lot closer to the small-company outfit that the law supposedly protects than any of the other companies I just mentioned. Murphy's, however, committed the (evil) sin of winning a contract from (evil) Wal-Mart, known for its competitive pricing. The other repentant was a Kwik-Trip convenience store, another small fry in the business. So Minnesota claims to be protecting the small operator by fining them into insolvency, allowing the largest companies to continue to charge artificially-floated margins and forcing Minnesota consumers to pay more at the pump.

What a great program!

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Posted by Ed Morrissey at June 2, 2004 7:07 AM

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