Many call it socialism, but customers line up for cheaper fuel.
The City of Somerset, Kentucky, has recently entered the retail fueling business, having converted a city-owned fuel storage facility into a no-frills gas station that sells gas for just a few cents below local fuel retailers.
Somerset city officials claim they have the best interest of their 11,000 residents in mind, trying to keep gas prices low, while showing “big oil” that they won’t be pushed around. According to an Associated Press report, Somerset Mayor Eddie Girdler said “We … decided we’ve got backbone and we’re not going to allow the oil companies to dictate to us what we can and cannot do. We don’t care if we don’t sell a drop of gasoline. Our objective is to lower the price.”
“There are at least two facts that get in the way of the premise that this will force oil companies to reduce prices,” said Jeff Lenard, vice president of strategic initiatives at NACS. “First, only about 0.4% of gas stations are owned by an integrated oil company. Second, retailers, regardless of makeup, have a very small impact on prices at the pump. Fuel gross margins — before expenses — have averaged 17.1 cents over the past five years, about 5% of the cost.”
And then, there is the issue of funding the competition. “They’ve used the taxpayer money that I have paid them over these years to do this, to be against us. I do not see how they can’t see that as socialism,” Somerset convenience store owner Duane Adams told the Associated Press in a recent interview.
Leaders in neighboring cities have questioned both the management logistics of operating a fueling station and the “slippery slope” that comes with the government controlling prices by getting involved in the retail business. In response to the media attention over Somerset’s move, leaders in nearby cities have emphasized that they don’t plan to go into business anytime soon.
“We all complain about high gas prices at times, but what would the city do if milk prices go up high, or bread prices. Would the city of Bowling Green go into the business of selling milk or bread or any commodity?” Bowling Green, Kentucky, City Commissioner Melinda Hill said in one news report.
She also expressed concern about potential job losses if her town were to follow Somerset’s lead, emphasizing that they would not want to do anything to compete with existing businesses or drive retailers away from her town.