Monday, January 12, 2009

Why are gas prices higher in the mountains of Colorado?


The local gas retailers are at fault.

Well it happened again. Gas prices went to around $4.50 a gallon and gas prices in the mountains went to about the same price. Now gas prices have dropped almost $3.00 a gallon in the Denver metro area while they only dropped about $2.00 here in the mountains.

In 2004 the same thing happened and at that time I was a Colorado State Representative and I started raising holy hell about why our prices did not drop as much as in Denver. I talked to anyone who would listen to me about this abomination.

I was on the House Transportation Committee and on the Transportation Legislative Review Committee. I brought it up every chance I could during the committee meetings.

The major oil companies told me that they sell their oil at the going world rate that is set by OPEC and other pricing organizations. They said it was regulated by supply and demand on a world basis and what they sold their products for was the going price with their profit built into that pricing.

The refineries told me that they sell gas to all of their customers at exactly the same price. The price at the refinery actually changes several times a day based on the cost of crude. A Denver retailer pays the same as a retailer in Dillon. The only difference is the per mile cost of hauling the gasoline. The increased cost to haul it to the mountains is less than one cent per gallon.

The gasoline retailers in the mountains told me that they had to add a “premium” on their price to take care of the cost of hauling gas a far distance into the mountains. When asked to provide documentation of this the response was that the information was “proprietary” which means that it is owned by the retailers and if released it might cause unfair competition. In other words proof of price gouging?

I personally checked that with the gas haulers. I actually talked to some of the executives as well as talking to the drivers. I would see a driver unloading at a gas station and I would go over to them and introduce myself as a State Representative. After talking for a while I would ask to see their “bill of lading” or their “weigh bill” and I could never find a “premium” for the mountains. The price in Golden was the same price as in Dillon or Breckenridge. The only difference was the per mile charge which is less than one penny per gallon added to the cost and not the current fifty to sixty cents we are paying over and beyond the prices in Denver.

I was told that there are two refineries in Commerce City near Denver. They are both owned by the same company. There are no other refineries in Colorado. There is a refinery in Rock Springs, Wyoming serving Grand Junctions and far western Colorado. The southwest part of Colorado is served by a refinery in Farmington, New Mexico. At one point I was told that there was a small refinery in Cheyenne, Wyoming but I was never able to confirm that information.

Our Future Summit had a public hearing in Frisco later and many people from the community showed up including some of the retailers.

The retailers used the argument that it cost more to operate in the mountains. I explained that I had interviewed their employees and they were making the same hourly rate as the people doing the same job in Denver. They then said their other operating costs were higher such as land costs. That is true but most of them were operating out of facilities that were built twenty or thirty years ago so the cost of land then was nothing compared to today. They did not have to re-buy their land every year. In some instances the retailer did have to pay rent and that cost did increase regularly. I explained that they paid the same price for electricity and natural gas as they did in Denver so there was no increase in those costs. About the only good argument was that they did have to pay for more snow removal but that should just be the cost of doing business in the mountains.

About the same time I received several threatening phone calls at home from people who identified themselves as gas retailers in Summit County. They told me to leave them alone because they deserved to charge a higher price just because we were a resort and were in the mountains. I was, in effect, told to sit down and keep my mouth shut.

The day after our public forum the price of gas in Summit County dropped almost fifty cents a gallon.

I did notice that the gas retailer who threatened the most kept his prices just as high as before and remains one of the highest in the county.

By the way the cheapest gas in Summit County for the past thirty five years has been Sav-O-Mat in Silverthorne. And they were the first to drop their prices even further after the forum.

Several years ago I volunteered to drive to every gas station in Summit County every Friday to record their gas prices for the Summit Daily News. I was not being paid to do this and I truly thought it might bring gas prices down. It had the opposite impact. When the retailers could see the gas prices all in one place in the paper they ended up all charging the same high price.

I filed a complaint with Attorney General John Suthers about price fixing when I discovered more than thirty gas retailers in a five county area charging exactly the same price per gallon for gas. He sent me a reply the same day (he did a very quick investigation) saying that just because they all had the same price it was not price fixing. By the way he was elected again after this happened.

I am not opposed to retailers making a profit or charging whatever the market will bear. I truly believe in the free market but when everyone charges the same price it is not a free market. It is price fixing. I noticed that today most stations will charge a penny or more difference than the station across the street. Maybe that part of the message got across.

I drive to Denver and Boulder on a regular basis and at times Summit County will actually have lower gas prices than Denver. I have never been able to figure that out either. Or maybe the local gas retailers have not figured it out either.

I think that we should just boycott our local gas retailers until they drop their price to the same level as the Denver metro area. We can all get our gas in Denver and let the local retailers continue to rape and pillage our guests and visitors.

You can also contact your Senator and Representative. Senator Dan Gibbs at 303-866-4873, dan.gibbs.senate@state.co.us and Representative Christine Scanlan at 303-866-2952, christine.scanlan.house@state.co.us. Tell them that you are sick and tired of high gas prices in the mountains and you are not going to take it anymore.

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