Most expensive gasoline in America – a zone pricing protest

Michael Giberson

WABC-TV reported Friday on what was likely the highest priced retail gasoline in the country: an Exxon station in Summit, New Jersey was offering regular grade gasoline for $4.89/gallon.  According to AAA’s Daily Fuel Gauge Report, the current average price in the US is about $1.85/gallon, and the average price in New Jersey is nearer $1.66/gallon.

You may wonder whether the station makes any sales given that the prices are more than double those of area competitor*, but the station manager is not trying to make sales, he is trying to make a point about zone pricing.  (Zone pricing is a practice whereby refiners charge retail dealers different amounts for fuel based on traffic volume, station amenities, nearby household incomes, the strength of competitors and other factors.)

From WABC-TV:

The operator/owner of the Exxon on Ashwood Avenue in Summit, New Jersey is Eel Chang. He says his price, more than 3 bucks per gallon above the state average, is a form of protest against his parent company, Exxon.

Tappy: “So you’re deliberately don’t want people to buy this gas?”
Station Owner: “I wouldn’t say that.”
Tappy: “You’re discouraging people from buying this gas?”
Station Owner: “That’s one way to look at it.”

Mr. Chang’s takes issue with something called zone pricing. That’s where oil companies sell gasoline at different prices to stations in different areas.

The article said that, according to the New Jersey Gasoline Association, an Exxon station just two miles away is in a different Exxon price zone and that station is charged 15 to 20 cents less per gallon for the gasoline.  Mr. Chang, who has sued Exxon over the practice, asserts he can’t make a profit when the company is charging him so much more for gasoline.

Chang stylizes his price as a protest against the company he contracts with, not as a public policy matter, but gasoline retailer associations have frequently pursued anti-zone pricing policies with state and federal lawmakers.  Before New Jersey lawmakers launch into action, they may want to see how the zone pricing ban is working out for neighboring New York state.  New York implemented its ban just last November, and soon there may be evidence to justify policy makers’ hopes for the zone pricing ban (or perhaps not).

(*The answer is yes, the station does make a few sales, because apparently some consumers don’t pay much attention to prices when they pull up to the pump.)

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