HURRAH! GAS PRICES in the District are down significantly since their May peak of more than $4 per gallon of regular. On Thursday, the price was just over $3.84. The cause, of course, is a drop in crude oil prices — not the campaign some D.C. politicians launched against the purported market manipulations of fuel wholesaler Eyub “Joe” Mamo, who also owns about 45 of the city’s 107 retail filling stations.
Nevertheless, the pols are still at it. Last week, D.C. Council member Mary M. Cheh (D–Ward 3) moved a bill through committee that would not only bar wholesalers such as Mr. Mamo from owning and operating retail stations but also prohibit them from selling stations they own without first giving current franchisees a chance to buy them. The full council will get a crack at this bill in the fall.
The case against Mr. Mamo is that his acquisition of 30 Exxon stations in 2009 gave him and one other wholesaler 70 percent of the District market, enabling them to make gas even more expensive in the city, compared with the suburbs, than it has always been.
On June 16, 2009, the day Mr. Mamo took over the stations, a gallon of regular gas cost 9.9 cents more in the District than in the metro area as a whole, according to the American Automobile Association. On Thursday, the differential was 15.5 cents — an increase of 5.6 cents. More than 60 percent of that increase is due to the D.C. Council’s increase of 3.5 cents per gallon in the local gas tax, which took effect Oct. 1, 2009. At most, Mr. Mamo’s acquisitions have increased the city-suburb gas gap by 2.1 cents, or a penny a year. Does this justify banning his widely practiced business model, under which he leases stations to operators on condition they buy their gas exclusively from him?
Ms. Cheh says yes: Recent experience convinces her that the D.C. wholesale fuel market is more resistant to new competitors than she thought four years ago, when she took the opposite side of this issue. But economic literature strongly suggests that businesses such as Mr. Mamo’s are efficient and that legislation such as Ms. Cheh’s might actually raise prices at the pump. It’s far from clear why the District, which is part of a competitive regional retail gas market, should be an exception to this well-documented pattern. At the very least, Ms. Cheh should ask the Federal Trade Commission for its view, as she did in 2007. Let’s see whether the FTC repeats the opinion it gave then, which was rooted in economic literature and, hence, favorable to Mr. Mamo.
But Ms. Cheh says this is about more than gas prices. The city must protect current gas stations, and their operators, from Mr. Mamo’s plans to sell the valuable real estate under his stations to developers — especially in Palisades, Georgetown and Capitol Hill, where operators charge their upscale clientele some of the highest prices in town. But if the city gives these franchisees a guaranteed shot at buying the land, as Ms. Cheh’s bill would do, and if they use it, what’s to stop them from going into the development business?
At least now we are beginning to see what this fight is really about. Once you get past all the rhetoric about price-gouging and trust-busting, what we have is a conflict among businessmen and their lobbyists. The hard-pressed motorist has little or nothing at stake. Exactly how many gas stations “should” the District have and where? We have no idea — and neither does anyone on the D.C. Council.