Utah may choose to put cap on gas prices

Decision expected today on enforcement of law

Published: Tuesday, Sept. 6 2005 12:00 a.m. MDT

State attorneys will meet today to determine if gasoline prices should be capped under a new law that prevents excessive price hikes when a state of emergency has been declared.

Emergency declarations were issued for Utah last week by Gov. Jon M. Huntsman Jr., and on Monday by President Bush. The declarations are necessary to open the door for federal aid in serving flood refugees who began to arrive from Louisiana over the weekend.

But the move can also kick in a state law that prohibits vendors from raising their prices more than 10 percent above the average price during the previous 30 days. That law was passed during the last legislative session, primarily in response to reports of price gouging in southern Utah after flooding.

Paul Murphy, spokesman for the Utah Attorney General's Office, said Sunday a review will be conducted today to determine if the new law should be enforced.

Gasoline vendors, however, say that despite soaring pump prices they are not making a lot of money on gasoline. In fact, Paul Callister, president of Salt Lake-based Premium Oil Co., makes more money from a 32-ounce fountain soft drink than a gallon of gasoline.

For many retailers, revenue margins on gasoline are razor thin, typically ranging from 10 cents to 25 cents a gallon. For Premium Oil, which owns and operates 15 service stations in Utah and Idaho, margins are even less, ranging from 8 cents to 15 cents per gallon.

That's less revenue than the 30 cents to 40 cents Premium Oil makes from the sale of a 99-cent soft drink at its convenience stores.

"We have to make double-digit margins to come out on gasoline," Callister said. "What is hurting us are the bank card fees. And as the prices go up, we get more drive-outs, people who fill up and drive away without paying. We don't get any help from the police, so we have to take a loss. We've had losses every month since January almost."

Callister said that is forcing his service stations to make customers pre-pay with a bank card. However, bank card purchases carry a 3 percent transaction fee, reducing Premium Oil's margins to roughly 6 cents per gallon.

Add to those fees competition from big-box retailers like Costco and Smith's, who, he said, sell their gasoline at a loss, and gasoline retailers, along with consumers, are feeling the squeeze.

Not that consumers are shedding tears for retailers, especially when the price of gas is practically rising as they pump it. In gas lines at the Salt Lake Costco or at an almost deserted Chevron station in Bountiful, people are complaining about the price hikes and, while they did not use terms such as "gouging," most did feel the jumps unnecessary.

"I don't think it needs to go up as much as it does, even if it does need to rise," said Jordan Sommers, who makes almost a dozen trips to fill gas tanks for the auto dealership he works for in Bountiful. When the price moves four cents between trips, "it seems a little bit ridiculous."

The problem for retailers with branded gas is that they actually have no control over the price of their gas. Instead, it is set by the wholesaler, producers like ChevronTexaco or ExxonMobil, responding to global prices, but companies also making record profits.

Blake Sanders, store manager for Slim Olsen's Chevron in Bountiful, said that they typically operate at about an 8-cent to 10-cent margin, but when prices are escalating as quickly as they are right now, it is practically impossible to maintain that margin. Even as he expected the price to break the $3 plateau — it was $2.89 Monday — "we will probably be selling it for what we will buy it."

Try out the new DeseretNews.com design!
try beta learn more
Get The Deseret News Everywhere