KickIdle.com Blog

HokiePundit gives his take on gas stations like Sheetz underselling local shops in Virginia. While I agree with his conclusion, we disagree in some of the details. HokiePundit concludes that

At first glance, this seems wrong to me. You’re competing unfairly, since they obviously don’t have the resources that you do. Furthermore, there is concern that prices will be raised significantly above cost after the small company goes out of business. …… Besides, federal antitrust laws would mean that there will always be competition, and so prices should always remain fairly low. While it isn’t nice, it’s not wrong. Such is the nature of the beast.

Let’s look at exactly what the state government proposed as a remedy.

The House of Delegates Commerce and Labor Committee killed legislation yesterday that would have prohibited operators from selling gas for less than they paid for it.

HokiePundit and I agree that the bill should have been killed, but not for the same reasons. This is really a poison pill for the local shops who wanted it. We can presume that they are already selling on as thin a margin as they can reasonably survive on. If they weren’t, they wouldn’t have any room to complain. So we’ll assume the local shops are already as competitive as they can be. Since the proposed bill wouldn’t affect the small shops’ prices, it must be depending on changing the prices of the large chains to get the desired effect.
How would it have affected the prices of someone like Sheetz? We can assume that it would force Sheetz to raise its prices, since there is an undisputed claim that Sheetz is selling gasoline at a loss. But here’s the key, in order for the small shops to regain an economic advantage over the large chains, this bill must force Sheetz to raise it’s prices to match or be higher than the local shops. This is vanishingly unlikely. A chain like Sheetz can purchase vast quantities of gasoline from refineries and thus negotiate preferential pricing on high volume, dependable business. Don’t forget to add in the fact that Sheetz has had far cleaner facilities and better selection of non-gasoline items (like their MTO subs) than almost every small shop I’ve been to. A small shop is going to have to either take on Sheetz in the service and presentation arena (not likely from my experience), or actually under-cut Sheetz’s prices — a virtual impossibility even if this bill had passed.
So, since it seems like small shops are doomed, why am I not clamoring for some sort of anti-trust action against Sheetz? For two reasons. One, I’ve never been to a Sheetz that didn’t have incredibly cheap gas. This means that Sheetz isn’t acting in a monopolistic manner (hiking prices after they have high market share). And two, small shops being hurt in a sector is not synonymous with the consumer being hurt in a sector. Capitalism, as a system, tends to discover and optimize efficiencies. The small shops that got displaced by Wal-Mart weren’t missed by anyone other than the downtown merchants who used to run them for exactly that reason: Wal-Mart does it better, for less. If Wal-Mart started ripping people off left and right, you can bet those same merchants would suddenly have a new crowd of customers. It will be the same way for gas stations.

A goodbye from the WSJ to Daniel Pearl.

The Misanthropic Bitch returns from hiatus with some commentary on Sept. 11. Read them both.