Friday, November 6, 2015

Unleash the Real Savings!

Tomorrow, thousands of shoppers will descend upon the new Costco in Grand Chute.  They will leave with ten pound bags of chocolate chips, four-packs of breakfast cereals and 500-count boxes of diapers--all at per unit prices much cheaper than your standard department or grocery store.  But one area they will not save a single penny is at the fuel station.  Costco sells gas at its stores as well--but Wisconsin's Minimum Markup Law prevents them from passing on any savings to its customers here that members in many other states do enjoy.

The primary reason my wife and I got Costco memberships last year was so that we could fuel up our rental Jeeps at the stores on all three islands we visited in Hawaii.  There, Costco sells gas for 40-60 cents less than all of the other stations.  And when you are talking about putting 17 or 18 gallons in at a time, that is some real savings--like eight or nine dollars every time we filled up.  And that is why those Hawaiian Costcos resembled photos from the OPEC oil embargo of the 1970's--with hundreds of vehicles lined up almost all day to fuel up--and those store run about 20-pumps in each location.

But here in Wisconsin, Costco's prices are the same as every other gas station in the surrounding community--all because of an antiquated law that costs residents money every time they go to fill up.  The argument for keeping the Minimum Markup Law has always been "If we get rid of it, the corporate stations will force the 'little guys' out of business--and then they'll use their monopoly to jack up prices".  But the real reason the Petroleum Suppliers support keeping Minimum Markup is that it give them a guaranteed profit margin--9.18% here in Wisconsin.  In what other industry does the government mandate that you must make a profit on the main product you sell?

You could argue that gas isn't even the main product of most convenience stores in today's market.  Most are like coffee shops and grocery stores that just happen to have pumps out front.  Many drivers buy their gas there only because that is where they also get their coffee or donuts every morning.  And remember, the discounts provided by Costco still require a membership.  Is every driver in the Fox Valley going to get a membership and drive to the one location they can use it every time they fill up?

Odds are, if there was no Minimum Markup, the difference in prices within individual cities would still remain fairly small.  And would you drive all the way across town to save three cents a gallon?  Personally I get gas at two places: the station that offers Regular with no ethanol a block away from my house and Fleet Farm because it's close to work and they give me the four cents off coupon when I buy something there.

So let's do away with Minimum Markup and allow the market itself to determine the price of gas.  If we see enough of a reduction, nobody would notice if the gas tax went up to actually pay for some of our road projects--instead of having to borrow another 350-million dollars.

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