Here’s an interesting news item about a bill the legislature passed recently:

Connecticut’s state legislature passed a bill that will make it easier for gas stations to give discounts of an estimated 10 to 20 cents per gallon to motorist’s paying cash for gasoline.

“Don’t look for this to happen overnight,” Michael Fox, executive director of the Gasoline and Automotive Service Dealers of America, told The Associated Press. Fox said motorists’ might need to wait until July before savings are realized.

“I can’t get signs fast enough. I’ve got to really make sure we roll it out correctly,” Fox told the AP, adding that his association will assist stations on security as cash on-hand increases.

Attorney General Richard Blumenthal said he is optimistic that the majority of Connecticut’s approximate 1,000 gasoline retailers will quickly begin dropping prices for people who pay with cash.

“I can’t tell you what gas station owners are going to do, but, my guess is some of them will be out there this weekend, potentially [offering cash discounts],” he told the AP. “The bill passed by lawmakers overrides any provisions in franchise agreements between gas station owners and the oil companies that may prevent retailers from offering discounts for cash purchases. It would be up to each retailer to decide whether to offer a lower cash price.”

Yet, the idea that gas prices are set by the distribution companies based on what they think the market will bear instead of letting supply and demand dictate pricing remains an issue.

Gas prices are affected by how far a station is located from its nearest competitors and the number of potential customers in an area. Which is why you see the high-priced gas stations located in the middle of nowhere. Wholesalers saw that low competition stations had a bigger profit and they wanted a cit of that so they invented the  ”zone prices,” charging the low-competition stations more for gasoline.

There’s some discussion on zone pricing and whether it hurts or helps here, essentially reporting that Fairfield County would get lower prices while they would rise in other parts of the state. Well, that’s a good thing for Fairfield County, which already subsidizes the rest of the state tax wise.

source: Convenience Store news, New Connecticut Law to Assist Cash Paying Motorists , June 16, 2008