Nine Months After the Zone Pricing Ban in New York…

Michael Giberson

New York banned “zone pricing” of gasoline as of last November. In the news:

(Henrietta, N.Y.) – Nine months after a state law banning zone pricing for gas went into effect, drivers can still find about a 20 cent per gallon disparity in price depending on where they buy it.

For example, gas at the Kwik Fill in Henrietta is $2.51 a gallon–18 cents less than at the Kwik Fill in Greece. …

New York State Senator Jim Alesi (R), of Fairport, wrote that law. He suspects wholesale suppliers and he’s already proposed an amendment to include them in a new law.

“We have to include the wholesalers in this, because as long as the wholesalers are not included in this then they can still engage in zone pricing,” he said.

Not sure what Sen. Alesi is talking about. According to the text of the law, it only applies to wholesalers. (To wit: “No wholesaler shall engage in zone pricing with respect to any motor fuel of like grade or quality.”)

Zone pricing has been discussed extensively here in the past (click to see posts). As previously noted, zone pricing is the practice of gasoline wholesalers setting prices for sale to gasoline retailers by area, based upon a projected ability of the area to support higher or lower prices. While practices vary by wholesaler, typically incomes in the area and the level of competition between retailers would be taken into account as wholesales select the price it wishes to charge.

Opponents of the practice, typically those gasoline retailers facing higher than average wholesale prices, claim that zone prices cause higher prices for consumers. Economic analysis tends to support the view that zone pricing raises some retail prices and reduces others, with no clear negative impact on consumer welfare. To the extent a zone pricing ban would affect prices, it would be expected to raise prices in lower-income areas and reduce prices in higher-income areas.

For this reason a zone pricing ban is sometimes considered “consumer protection for the affluent.”