The Daily Shakedown

News

The (gassy) truth is out there

Comments 6

by Tom Giffey, Tom Giffey

These three look like they're up to something.
These three look like they're up to something.

For years, relatively high and relatively uniform gas prices in the Chippewa Valley have caused locals to mutter about collusion and conspiracy whenever they fill up their tanks – or, more often, whenever they see how much cheaper regular unleaded is just a few miles down the interstate in Osseo.

In response to the commonly held belief that some sinister pump plot is at work, a group of UW-Eau Claire professors and students tackled the thorny question of gas prices in a research report released last week. For those who believe the truth is out there, the UWEC team, which investigated the issue on behalf of the City of Eau Claire, came up with some enlightening answers.

So what conspiratorial group is behind Eau Claire’s high gas prices? Oil barons who gather in the storeroom of the Kwik-E-Mart each week, passing around a pack of Slim Jims and setting prices? Is it the mafia? The Priory of Sion? Aliens? Mafia aliens?

Sadly for the tinfoil hat crowd, the gang of statistical sleuths who probed gas price data from April through September found no evidence of a dark conspiracy, paranormal or otherwise. Instead, the Blugold Bloodhound Gang – assistant professor of geography Ryan Weichelt, assistant professor of economics Laura Middlesworth, and students Ben Possi and Emily Anderson – concluded that a few simple factors combine to pump up prices in Eau Claire.

First, they found that the local gasoline biz is dominated by two players.

“Holiday and Kwik Trip comprise 68 percent of the gas market in Eau Claire,” UW-EC student Ben Possi told the city’s Fiscal Policy Advisory Committee ...“Holiday and Kwik Trip comprise 68 percent of the gas market in Eau Claire,” UW-EC student Ben Possi told the city’s Fiscal Policy Advisory Committee on Wednesday, according to the Leader-Telegram. According to the team’s report, the Eau Claire gas market is more concentrated than markets are in similar-sized cities in Wisconsin, Minnesota and Iowa. (In St. Cloud, Minn., for example, the two biggest chains control just 39 percent of the market.) In addition, gas stations are less densely concentrated in Eau Claire than in comparable cities, meaning there’s less of the kind of textbook head-to-head competition that could drive prices down.

The second big reason Eau Claire gas prices may be high is more legalistic and historical. While the musty law in question doesn’t quite date back to the days of the Knights Templar, conspiracy buffs can at least take solace that it’s as old as the Great Depression. The so-called minimum markup law requires gas stations to boost petrol prices a certain percentage above their wholesale cost. This was meant to prevent predatory pricing (i.e., the big guys undercutting the little guys and driving them out of business) but the UWEC research team suggests it only serves to drive up prices for drivers, not foster competition.

"Our study does not state direct collusion is occurring,” Weichelt said, according to a university press release. “There seems to be an inherent lack of competition in Eau Claire, but it does not appear that business owners are violating the markup law or any other.”

In short, if you’re looking for juicy conspiracies, keep digging into the Kennedy assassination and Area 51, ‘cause there isn’t one here: All we have is a lack of competition compounded by state law. Of course, that probably won’t make you feel any better the next time you fill up.

« Previous  Next »