Michael Giberson
Gasoline consumers in well-off Fairfield County, CT, pay gasoline prices that tend to be higher than prices in the rest of the state. The consumers don’t like it.
State legislators representing the region believe the issue is “zone pricing,” a practice by gasoline wholesalers which sets wholesale prices to different levels in different areas based on beliefs about how much consumers are willing to pay. These legislators are proposing to ban zone pricing in Connecticut.
Meanwhile, in New York, a law banning zone pricing went into effect about 2 1/2 years ago. It hasn’t had a noticeable effect on gasoline prices. (See WHAM-ABC 13: “Zone Pricing Law – Why it Didn’t Work.”)
Insight from economics: zone pricing may affect whether retailers or wholesalers capture a larger share of the profit, but a zone pricing ban probably won’t have much affect on retail prices. If the law has an effect, it will tend to raise prices in lower-income areas at least as much as it lowers prices in higher-income areas.
Question for proponent of a zone pricing ban: why do you think your law will succeed where a very similar New York law has failed?
NOTES:
- Current text of committee bill.
- More info from the CT General Assembly.
- Editorial from the Fairfield County-based Connecticut Post.