Gasoline Supply Chain Stories in Post-sandy New Jersey and New York

Michael Giberson

Edward McAllister and David Sheppard, with Reuters, have a great story on the connection between disaster preparedness and the nature of retailer ownership.

They report that corporately-owned retailers, such as convenience-store chain WaWa and vertically-integrated gasoline refiner/retailer Hess, drew on corporate resources in advance of the storm to be ready to return stores to service quickly. Meanwhile, most of the big gasoline brands in the area–Exxon, BP, and Shell, for example–are small franchise operations lacking deep pockets, geographical scope, and logistical sophistication. Perhaps unsurprisingly, it looks like WaWas and Hess and other large corporate retailers were able to help most of their stores to get back in business and keep them supplied. The smaller franchise operations, on the other hand, had more trouble.

Also probably not too surprising, none of the seven gasoline retailers charged with price gouging in New Jersey on Friday were large corporately-owned stores. (The brands of the stations charged: Lukoil (2), Gulf, Delta, Exxon, BP, and Sunoco.)

As I’ve noted in the past on the topic of industrial organization and price gouging, large geographically-diversified companies are much better positioned to respond to disasters. A company with distribution centers across the region already employing constant-contact computer-coordinated restocking technologies are well position to re-organize shipping patters in the wake (or even in advance of) damaging storms and natural disaster. If nothing else, companies with national reputations can enjoy much broader payback from positive public relations stories than can a two- or three-station chain of gasoline stations.

Of course, one implication of these differences is that anti-price gouging laws will fall heaviest on very small retailers. Surely not the intended result, but nonetheless.

ALSO NOTE: WSJ Q&A on the localized gasoline crises.