A Gas Retailer’s Perspective

I received this email that I thought I would share. 

I’ve written to you a couple of times in the past regarding the irrelevancy of the minimum markup law on gasoline. I had to write this morning after you again brought up the law just a few minutes ago.

I am a gasoline retailer and own a fairly heavy volume convenience store northwest of Green Bay. These are my ACTUAL margins on all grades of gasoline for the month of July:

Regular - 2.67%
Mid-grade - 3.09%
Premium - 3.16%
Off-Road Diesel - 9.88%
Diesel - 2.72%
TOTAL - 2.99%

These are my ACTUAL margins year-to-date:

Regular - 4.34%
Mid-grade - 5.07%
Premium - 4.65%
Off-Road Diesel - 11.52%
Diesel - 4.11%
TOTAL - 4.61%

As you can see, my actual margins are much less than required by the minimum markup law. When you take into account credit card fees, which vary from store to store but average about 2.0% of sales, my profit margin for July gasoline sales is closer to 1%! One stinkin’ percent!! That’s 4 cents on a $4 gallon. The state of Wisconsin makes 31 cents a gallon and the federal government makes 18 cents a gallon and they’re not here working seven days a week.

My point is the minimum markup law is irrelevant. It is much like the speed limit. The law is on the books but it is ignored and not enforced for the most part, especially when gasoline is $4 a gallon. We should be focusing on putting more pressure on politicians whose policies have given us $4 a gallon gas and having them change those policies. As you can see from the above numbers, the minimum markup law is not inflating the street price at all.

Keep the minimum markup law on the books or repeal it, as a gasoline retailer it means nothing to me.

Regards,

Jeff from Green Bay

1. That was fascinating information. Had no idea…many thanks to Jeff for sharing his perspective as a gas retailer.

   Posted by Jeni on July 27, 2008 at 2122 hrs




2. Taking Jeff’s information at face, this means that there is no reason NOT to repeal this outmoded law.

   Posted by (JavaScript must be enabled to view this email address) on July 27, 2008 at 2220 hrs




3. Now, if only Speaker Huebsch and Majority Leader Decker could figure this easy one out.

   Posted by (JavaScript must be enabled to view this email address) on July 28, 2008 at 0123 hrs




4. Great information. Perhaps we needn’t bother with repealing the law, especially since both parties are bought and paid for by the interests that would want it to remain on the books anyway.

   Posted by (JavaScript must be enabled to view this email address) on July 28, 2008 at 0632 hrs




5. Umnnnhhhh….

   Neat trick, counting CC charges against gasoline sales.  But irrelevant to the question.

   CC charges are G,S,&A;(general sales and administrative expense), NOT a deduction from gasoline margins. 

   We also note that four percent of TWO dollars is 8 censt; four percent of FOUR dollars is 16 cents.  So Poor Jeff is whining that he’s doubled his nominal income on gasoline in the last three years?

   My heart bleeds.

   Posted by dad29 on July 28, 2008 at 0701 hrs




6. The state of Wisconsin makes 31 cents a gallon and the federal government makes 18 cents a gallon and they’re not here working seven days a week.

   This is still disturbing.

   I had a short conversation this weekend with a kid who grew up in rural Ohio and drove 300 miles to be in Milwaukee for the weekend telling me Congress should be raising the federal gas tax to European rates—at least!—so people stop driving cars, but “Republicans love Big Oil”.  Big Oil my big ass…. I didn’t know anyone who had ever been outside of Manhattan could be so clueless about the geography of the interior of America.  Those Starbucks frappacino drinks don’t grow in a plot behind his local Speedway…

   Posted by HeatherRadish on July 28, 2008 at 0803 hrs




7. Why are some retailers fighting so hard to keep the law on the books if it has no impact?

   Posted by Fraley on July 28, 2008 at 0932 hrs




8. The minimum markup law doesn’t only apply to gas. It also prevents stores like Wal-Martor Kohl’s from selling “door busters” to get traffic.

   So even if it’s actually irrelevant to gas markups, consumers are still getting screwed in other ways with this law.

   Posted by (JavaScript must be enabled to view this email address) on July 28, 2008 at 1001 hrs




9. The market works best when it works “efficiently” - while I appreciate Jeff’s comments, I have to wonder about the proliferation of gas stations - seemed to have sprouted up at every corner everywhere - kind of like “Starbucks” overkill.  Seems like for better or not, the guaranteed markup has built in a certain assumption to cover overhead costs.  It’s nice that we can pull right up to the pump without waiting for the customer ahead to finish, but I wonder the price is for that convenience.  Honestly, I can’t remember the last time I had to wait at a pump anywhere.

   It hasn’t been mentioned yet, but there is also a mandated 3% markup at the wholesale level too.

   Posted by (JavaScript must be enabled to view this email address) on July 28, 2008 at 1032 hrs




10. It is my understanding that Kwik-Trip which is one of the larger gas retailers in the state has their corporate headquarters in the legislative district of Speaker Huebsh.

    Posted by (JavaScript must be enabled to view this email address) on July 28, 2008 at 2105 hrs




11. Fraley, Why are some retailers fighting so hard to repeal the law if it has no impact? As someone who apparently is getting paid to fight for repeal, you can answer that for us.

    Posted by Jack Lohman on July 29, 2008 at 0729 hrs




12. http://www.wpr.org/webcasting/audioarchives_disp lay.cfm?Code=jca

    More of the discussion between the Wisconsin Institute for Leadership and the Petroleum Marketers

    The best the opposition can say is that the WPRI study is flawed and that they have studies that prove the state-mandated price hike actually fosters competition and lowers prices. That’s right. They argue a price hike lowers prices.

    Posted by Fraley on July 29, 2008 at 1337 hrs




13. Typical Fraley. Ignore any question to which the answer would be embarrassing. Okay, so we know you are a paid consultant on the issue. I’ll try to use small words so you can understand the question:  If the law has no impact one way or the other, why are you being paid to lobby for its repeal?

    I don’t know that I like it or don’t like it, but when one special interest faction tries so hard to repeal a worthless and ineffective law, I start to get nervous. The public should too. I just don’t see where repeal makes a hill of beans, but Wal-mart is a hell of a lot smarter than me. What are they after Brian?

    Minimum markup on gasoline targeted:
    http://moneyedpoliticians.wordpress.com/2008/07/20/mini mum-markup-on-gasoline-targeted/

    Posted by Jack Lohman on July 29, 2008 at 1405 hrs




14. Jack,

    This is tiring.

    You know that I work for WIL…how? BECAUSE WIL PUT OUT A PRESS RELEASE wherein I’m quoted as it’s executive director.

    Shocking.

    I can’t speak for any specific company or industry. You should feel free to ask them.

    As for WIL, our opposition to this arcane depression area law has been laid out quite clearly over the last few weeks. But, here goes:

    The minimum markup law, which has been in place since the 1930s, requires wholesalers to mark up their prices by at least 3 percent and retailers by at least 6 percent.

    At today’s prices, that could have stations pricing gasoline more than .30 more a gallon higher.

    There is,  however,  a provision that allows stations to lower the price to be competitive with nearby stations, includin6g those across state line, so the impact isn’t that high…but…Last Thursday, the Wisconsin Policy Research Institute issued a report that details how the law adds about 8 cents to the price of every gallon of gasoline purchased in Wisconsin.

    That state-mandated price hike is costing Wisconsin drivers as much as $278 million more a year.

    We are asking people to call the Governor at 608-266-1212 to request that he call the legislators back from the campaign trail and convene a special session to repeal the law. The most efficient way to enact this change is to convince one person (Governor Doyle) to bring back the legislature. He’s been on record for years opposing this law, convincing him to follow through on those public pronouncements is our goal.

    Supporters of minimum markup believe it helps prevent large companies from potentially running smaller retailers out of business.

    It is understandable that they are trying to protect their members who, they believe, may be unable to offer low prices for fuel if the marketplace was more competitive.

    However, while acknowledging that lower prices would be the immediate result of increased competition, they offer no evidence that the competition would eventually lead to higher prices for consumers.

    Unlike laws in place for most other retailers, the minimum markup law prevents the free market from working. Competition is good for businesses and consumers. It allows the market to set prices, not the state.

    The repeal of this law will not end high gas prices in Wisconsin. But it will be a step in the right direction.

    Posted by Fraley on July 29, 2008 at 1524 hrs




15. Yes, Brian, this is tiring, but only because you continue to dance around a very key issue, and that’s your personal motives. Yes, I can see that you’d rather not be exposed as a paid industry hack. I can only assume that you are receiving money for opposing this law, as WIL pays your salary and WIL is likely receiving cash from the special interests to have Fraley act on their behalf. Okay, I call that an industry hack, but if you want to hide behind their skirts, so be it.

    But please, don’t feed us this crap that WIL is altruistically opposing an “arcane depression area law.” WIL has its own motives and they should own up to them. They are being paid to oppose this law, otherwise I’d guess they’d just sit the issue out.

    As to the law itself, I have demonstrated that Wisconsin’s gas prices (sans taxes) are lower than in adjoining states that do not have such a law. Thus I would agree (and argue) that having the law versus not having the law has zero impact on the price of gas, and your estimate that stations are, in effect, charging an extra .30 more a gallon is pure garbage. You stated above “zero impact” and now you are saying a 30 cent impact. You can’t have it both ways.

    The idealist in me says this is a stupid law and it should be repealed. But I’m also pragmatic and I don’t trust you or Wal-mart or WIL.

    And I don’t believe WPRI any more than I believe you. They also receive funding from the special interests. I found our gas being lower than surrounding states when taxes were removed, even though they had no law and we did. Our gas prices are more driven by state taxes on gas, and those are driven by cash from the road builders going into the pockets of politicians. But you know that scenario.

    >>> “That <u>state-mandated price</u> hike is costing Wisconsin drivers as much as $278 million more a year.”

    That’s BS and you know it. See http://tinyurl.com/5arqv7

    And Oh, just so Fraley is happy, let me mention the governor’s phone number again: It’s 608-266-1212. He wants me to say that.

    Posted by Jack Lohman on July 29, 2008 at 1612 hrs




16. Jack, do you always have a “projection” problem, or only when you’re on the blogs?

    Generally, Jack, the people who are least willing to take someone at face value are those who are themselves….ah….integrity-challenged.

    Be careful what you telegraph, Jack.

    Posted by dad29 on July 29, 2008 at 1826 hrs




17. Ah, good offense, Dad29, but I only have a projection problem on right-wing blogs. But you’ll see my complete disclosure on my website at
    http://moneyedpoliticians.wordpress.com/about/ and
    http://www.throwtherascalsout.org/disclosure.htm.

    But I expect that you’ve seen it before. I do not use pseudonyms to hide my identity, and I’m pleased that Fraley doesn’t either. And no, I don’t take contributions or renumeration from people that I represent, or anybody for that matter. And I only take at face value those people who are not being paid by the industry to pass or repeal laws under false or misleading terms. Reminds me too much of the tobacco industry.

    So we are obviously cut from different cloth.

    Posted by Jack Lohman on July 29, 2008 at 1846 hrs