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Thursday, February 22, 2024
HomeNewsArchivesWE NEED TO KNOW WHY PUMP PRICES ARE SO HIGH

WE NEED TO KNOW WHY PUMP PRICES ARE SO HIGH

To the Source:
This is in response to the earlier Open Forum letter "Big Two aren't about to slash prices here".
It may be unfair to criticize solutions to high gas prizes as I sit here in Williamsburg, Va., where gas is currently around $1.30 per gallon, but I feel compelled to respond to Mr. Grybowski's ideas for lowering prices. He and I absorbed completely different lessons from our economics classes, but that may be because I didn't pay as much attention. One of the first things I remember as we started to draw supply/demand curves was that artificial price ceilings and floors create either waste or shortages.
I'm not such a believer in graphs and the power of the invisible hand that I think the free market and my Economics 101 class are perfect indicators of real world events, but it is general economic principle that price controls lead to artificial shortages. The idea is that if the government requires sellers to sell at a specific price, the sellers have no motivation to meet the market demand. The unintended consequence of a price control may be lines at gas stations. Of course, economics models are only decent at predicting situations in a perfect world.
Perhaps the gas distributors really are taking advantage of the situation and artificially increasing their prices. All things being equal, this is a pretty compelling scenario, given that gas prices on St. Croix are often 50 cents or more cheaper than on St. Thomas. That alone suggests the need for some governmental intervention. However, whether that means that price controls are in order isn't so clear.
Most gas stations on the mainland are more efficient, with automated pay-at-the-pump features and much less need for attendants. I haven't been home in over a year, but I don't think that local gas stations have all these features. A hidden factor in gas prices is federal and local taxes. A station in Williamsburg proper sells gas for $1.37 a gallon, while just across the county line, the same gas is $1.30 a gallon; and in rural Virginia or on military bases, that same gas is $1.22 a gallon.
How much is the tax on gasoline in the Virgin Islands? Even if we decide that high gas prices are caused by gas distributors, do we really want the government stepping in to set the prices? Who will decide what a fair price is? I shudder to think of our fuel system becoming anything like the Water and Power Authority. Gas prices might become the latest pawn in our electoral battles, with candidates offering progressively lower prices until no one is willing to supply gas to St. Thomas any more.
Lest I be labeled a critic with no ideas of my own, I will offer several solutions.
– First, someone (government agency, private group) needs to find out why gas prices are different between St. Thomas/St. John and St. Croix (unless this is obvious to everyone but me). I know that some difference is reasonable because the refinery is right there on St. Croix, but I don't think the huge difference in price can be explained solely through transportation costs. If it is just a matter of opening Hess stations on St. Thomas and St. John, then let's find someone with the money to do that.
– Second, our gasoline research group should find out why gas prices are so high — whether it's taxes, excess profits, supply issues, or high overhead. It's easy to demonize big business and energy companies; but while they sometimes gouge consumers, it is unfair to assume they always do. Governmental regulations and taxes have a way of driving costs up, and the increases get passed directly to consumers. Even if gas stations are inflating the prices, it may be simply a seasonal measure to allow for lower prices later in the year.
– Third, even if it is outright extortion, to expect the Virgin Islands government to fix anything is marvelously hopeful. I think we would all be better served if the government were left out of things, at least until it has dealt with more important problems. I was born on St. Thomas and spent my entire life there (until college/law school) and I will return when school is done, and I know just how important a car is. Our public transportation is woefully inadequate, and it's too hilly to bike anywhere, so a boycott of gas stations wouldn't really work. But any way that people could collectively reduce their consumption, whether it is car pooling or driving more fuel-efficient cars, would be a step in the right direction.
I realize that these ideas may seem woefully inadequate to those paying $2 a gallon. I was frustrated at paying $1.85 a gallon when I was home last summer, and I wish somebody would do something. However, relying on the government for a solution is overly optimistic at best and extremely dangerous at worst.
Travis Wheatley
Williamsburg, Va., and St. Thomas

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