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BUFFALO, N.Y. -- Gasoline retailers in Western New York are making margins on fuel that are more than double the national average, and are to blame for the region’s high fuel costs, according to Rep. Brian Higgins, who asked the Federal Trade Commission (FTC) to shift its ongoing investigation into the high gasoline prices here to the retail level.
Gas stations are tacking an average of 55.1 cents per gallon to the cost of fuel, compared with the national average of 23.6 cents, and in Jamestown, N.Y., Higgins said retailers at one point were charging an average margin of 71 cents per gallon, making that city the most "profitable market in the country," according to a report by The Buffalo News. Higgins, at a news conference held Friday, said he based his claims on "very disturbing" data compiled by the Oil Price Information Service (OPIS), an independent group that analyzes the price of gasoline across the country. Buffalo Niagara’s gasoline prices have consistently ranked as the highest or close to the top in the nation in recent months, despite the plunging prices for a barrel of crude oil, the newspaper report stated.
Higgins’ assessment came under strong criticism from the New York Association of Convenience Stores. "Attempting to draw conclusions about retail profitability based on a snapshot of price data at any given moment produces misleading results," James Calvin, the association’s president, told The Buffalo News.
The profit margin Higgins refers to, Calvin said, represents the difference between what retailers pay for the fuel and what they charge customers. "Much of the gross margin goes to pay expenses associated with selling gas, property taxes, labor, energy, environmental protection and especially credit-card processing fees, which at a pump price of $2 wipe out four to six cents of the retailer’s gross margin per gallon right off the top," Calvin said.
He noted last spring, margins set by Western New York gas retailers were among the lowest in the country, "averaging a mere two cents per gallon" and in some cases stations sold gasoline at a loss. "It’s not fair to point fingers when retail margins are elevated without acknowledging the offsetting periods when they are low or even non-existent," he said.
In a letter to FTC Chairman William Kovacic, Higgins cited the OPIS data and the lower prices of gasoline in other upstate regions to make a case for focusing on retailers.
"The OPIS data clearly shows that the origin of the discrepancy is aggressive profit-taking at the retail level," Higgins said, noting the average price of a gallon of gasoline here is $2.29, while in Albany and Syracuse, it was $2.07 and $2.03, respectively.
In addition to the FTC investigation, New York State Attorney General Andrew Cuomo stepped up his investigation into the disparity in gasoline prices in Western New York. "Subpoenas have been issued across the supply chain and if any violation of the law is uncovered, we will pursue it aggressively," a Cuomo spokesman said.