Letter: Aspen’s gasoline prices are legal extortion
I just returned from a trip to Sacramento, California. There I witnessed California’s temporarily high gasoline prices and spent two days getting an earful from politicians furious at the sudden surge in the state’s gasoline prices. I returned to see that an out-of-state firm is still legally extorting millions from the Roaring Fork Valley’s consumers for the same product. However, politicians in this valley are surprisingly quiet. I do not understand their unwillingness to take on the firms that are overcharging us. The retail price of gasoline today should be around $2.75 per gallon. Instead, it is $3.59, according to GasBuddy.com. The firm from Tennessee supplying much of Aspen’s gasoline, as well as the fuel to Basalt, Carbondale and many other mountain communities, has denied consumers most if not all of the benefits of lower oil prices by charging dealers excessively high prices. Other suppliers such as Valero, using standard industry practices, have followed their lead.
The pricing practices being followed by the Tennessee firm and others are legal — this is legal extortion. The question is why our politicians are mute.
One might also ask why am I being so strident. After all, I traveled to California to defend the oil industry. A consumer activist group paid for by the philanthropist Tom Steyer (the liberal who threw millions into the last election in an unsuccessful effort to support his causes) wrote that “although the lawmakers invited oil company executives to testify at the hearing, Western States Petroleum Association instead paid economist Phil Verleger to speak on their behalf.”
My answer to this question is simple: The price increase in California was caused by the unexpected shutdown of more than 30 percent of the state’s refining capacity. Supply was lost, and prices rose. This has happened before. I served on a task force headed by California’s attorney general that looked into the matter in 1979. I and three other members of the task force testified on the question to a state Senate committee at the end of march.
I testified in March that markets in California are working pretty well given the isolated structure of the state’s market. However, California politicians are willing to take on the oil industry any time prices rise or do not fall when world prices fall. They have the interests of their constituents in mind.
Our politicians should do the same. If they asked me what to do (and they have not despite my letters and columns in The Aspen Times), I would give them two alternatives. The better alternative would be to build a publicly owned gasoline station that was leased to a private entity on the condition that the lessee offered lower prices based on wholesale or rack prices in Denver. That could bring prices in Aspen down by a dollar. The Tennessee firm would lower its prices to other dealers in Aspen to keep its market. (Its retail station is charging $2.25 in Grand Junction today.)
As a second and last alternative, I would suggest that our politicians petition state legislators to pass legislation that permits the imposition of price controls. A little-known 1988 decision by the U.S. Supreme Court upheld the right of states to impose price controls on petroleum products. The court found that federal pre-emption had ended when a federal statute expired in 1981. The state of Colorado could pass legislation that capped retail prices based on wholesale costs in Denver or Denver retail prices. The controls could cut the excess profits earned in supplying some mountain communities. (In some other communities such as Silverthorne and Leadville, prices are around $2.10 today.)
While I think that price controls are a terrible idea, I find the continuing legalized extortion of valley residents more offense. As the election approaches, ask the candidates to take a stand.
Philip K. Verleger
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