The Coastal Post - April, 1998

And Now A Word From The Petroleum Industry About Supply, Demand And Gouging

The price of gasoline could increase and many people may lose their jobs if major oil companies are forced to divest themselves of company-operated service stations, business and industry representatives warned today at committee meetings of the Association of Bay Area Governments (ABAG).

The policy-called "divorcement" by proponents-was brought before ABAG by San Francisco Supervisor Michael Yaki, who has introduced a divorcement bill in the City, and claims prices will fall if the oil companies are prohibited from operating their own stations.

"In our view, regulations like Supervisor Yaki's could well lead to higher gas prices, coupled with a loss of valuable jobs throughout the Bay Area," testified Julie Davis, of the San Francisco Chamber of Commerce.

"Rather than create additional regulations, we would like to see Bay Area cities and counties establish policies that would make it easier for new gas stations to open for business, bringing much-needed competition and the resulting lower prices to Bay Are consumers," said Davis.

Divorcement has failed virtually everywhere it has been tried, observed WSPA spokeswoman Anita Mangels, citing federal and state analyses which conclude divorcement and related wholesale pricing regulations result in less competition and higher gas prices.

"The problem isn't who runs the gas stations, or the wholesale price of gas," Mangels explained. "It's basic market economics."

She referred to the California Energy Commission (CEC) report earlier this month which stated: "Gasoline prices in the LA area are lower than in Bay Area communities because competition among retailers is more fierce down South. The cost of doing business [in LA] is less because real estate is cheaper and available sites for gas stations are more plentiful."

The Energy Commission also reported that gasoline prices are the lowest in the state in nearly 30 years.

Mangels cited Nevada and Hawaii as states which have virtually repealed their divorcement laws after finding them to be anti-competitive and anti-consumer.

"These types of regulations have been promoted for decades, but there aren't many of them on the books because they simply don't work," Mangels emphasized.

Angelo Siracusa, former president of the Bay Area Council, added that government interference in this "extremely complex" issue was inappropriate, warning: "It's akin to mandating that cities and counties force supermarket chains or major banks to divest themselves of their branches. One might logically ask: "Who's next?"

Siracusa suggested that the Bay Area Economic Forum (BAEF)-not ABAG-is the proper organization to study gasoline pricing because it is a public-private partnership specifically organized to deal with Bay Area economic issues. BAEG was co-founded by ABAG, and is currently chaired by former University of California, Berkeley, Chancellor Chang-Lien Tien.

San Francisco Mayor Willie Brown this week announced that he will not support Yaki's ordinance. Brown was quoted in the San Francisco Examiner as attributing price levels to the overall high cost of living in the Bay Area, which he called "the most desirable place in the world."

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