There is a curious story out of Voorhies, New Jersey that touches on a past subject of how gas stations set their prices. The Lukoil station in the town is charging $3.98 per gallon while other area stations, including one directly across the street, price gas at $1.79. What is interesting is that even Lukoil says that it is trying to strip owner Tony Caprio of his franchise over his gouging of customers.
The station is charging super unleaded at $4.59 a gallon and has been previously criticized as the most expensive gasoline station in the state. Some residents say that they have been fleeced unwittingly, including one who said that his teenager spent $65 on 12 gallons at the station.
When confronted by media, Caprio insisted that he was not in charge of setting prices and said “I don’t make the gas prices, my boss does. You know what? Ask him.” However, the reporter said that Lukoil confirmed that Caprio owns the station and that they are trying to drop him from the franchise.
I have tended to favor an open market approach and to allow competition to handle such aberrant players. So long as he meets the state rules of publicly posting prices, it is up to him and the customers to make such market choices. This is not a situation of gouging in a scarce market like during or after a hurricane. State laws protect against such pricing violations.
It is a curious story since this is a competitive market with an alternative across the street. I have tried to figure out why it would be in Caprio’s interest to set the price so much higher than the competition. Let’s assume that a certain number of people buy gas under the blind assumption that stations are priced with a few pennies of the competitive price. Yet, most people do compare. In order for the gouging to work, you have to make so much money on fleecing the unwitting customers that you offset the loss from not competing on price. That seems unlikely with a competitor across the street. It just seems to defy logic.
What do you think?
Source: UPI
He could be saving money on delivery? I mean, if he sells less, than he has to have less gas delivered as well. That might help his overall costs. An additional difference is that gas taxes are per gallon, and not a percentage, so he is making more poor gallon and paying less for it in costs. That makes it a bit easier to make up the difference.
Most likely an auto repair business with zoning for a full service service station. He would rather work on cars than pump gas, but if someone wants to buy gas, it will be worth his while. I knew someone who did this, and he wasn’t even in a state where he would have to pump the gas. Just going to the cash register was a sufficient PITA for him to discourage gas sales.
On the other hand, it seems like there is something hinky going on with Lukoil stations in general. Every one I have seen always had gas prices set 20 to 40 cents higher than the going rate. I know there has been some financial weirdness associated with Lukoil’s purchase of Getty and their subsequent spinoff of Getty, which then went through bankruptcy, but I still can’t see how actively discouraging customers makes them money. I do know that Lukoil is actively controlled by the Russians, so maybe the idea of capitalism and competition is still foreign to them.
Stan – maybe they are trying to save all their gasoline for Russia.