We Need A State Law To Prevent Cheap Gas?


A new gas station opened up in a North Carolina town recently.  As it turns out, that gas station is interested in attracting customers AND selling things other than gas.

It would seem that station owners would or should be able to adjust the price of their gas at whatever levels they see fit.  Higher prices would generate more money per gallon to be sure, but lower prices would generate more gallons.

Discretion of the station owner, right?

Wrong.

It seems that there is a state law regulating the price of gas and when and by how much owners are allowed to lower that price:

Raleigh, N.C. — Gas prices in Fuquay-Varina have been 15 to 20 cents cheaper than in nearby towns this month. Prices there have been hovering around $3.29 per gallon.

Murphy USA fired the first shot when it opened a new station. State law allows a gas station to sell fuel below cost for two weeks after its grand opening.

Murphy USA opened a new gas station.  They want to attract business.  So they lower the price of one of their products.

“They just want to get customers to come in, try out the gas station, change their pattern, see that there’s a different level of service available. It’s just an introductory offer,” Monsky said.

Perfectly reasonable.  My question is this; why can’t any station owner lower the price of gas at any time they want for the same reasons?  After all, the result of the lowering of prices?

Nearby stations lowered their prices to compete.

The. Market. Works.

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1 comment
  1. In general selling things below cost is seen as potentially damaging to the free market since some sellers can afford to take loses for a long time, driving others out of business and then having more capacity to increase price (especially if the cost of re-entering the market is high). Anti-dumping provisions in the WTO are based on this same principle. I’m not sure the rationale here, but presumably its meant to protect small gas stations from a potential existential threat from those who would sell below cost in order to get rid of competition. That doesn’t mean the regulation in question is good, but I can see the logic for such regulations.

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