RETAILERS READY TO BATTLE CREDIT CARD FEES ON THE HILL

This week Representatives John Conyers (D-MI) and Chris Cannon (R-UT) introduced legislation to address unfair and burdensome credit card interchange fees.  In response to the proposed legislation, the Merchants Payment Coalition (MPC), of which PMAA is a member, issued this statement: “We applaud the legislative efforts by House Judiciary Committee Chairman John Conyers (D-MI) and Rep. Chris Cannon (R-UT) and the Senate Judiciary Committee to fix the broken interchange fee market. With about 80 percent market share, Visa and MasterCard operate like price fixing cartels, each monopolist sets ‘take it or leave it’ oppressive credit card interchange fees and rules, and they do so in secret. Their illegal price fixing alone costs our customers more the $350 per household every year, and it is rising. This legislation under consideration would end the practice of anti-competitive rate setting by the credit card industry and give retailers an opportunity to negotiate terms and conditions just as we do with every other business. The only viable alternative to fix this problem is government regulation, which we oppose. 

Retail is all about negotiating to bring value to our customers. Unfortunately, there is no negotiating with the credit card industry.  The proposed legislation would finally bring some competition to this broken market.”

SENATE COMMITTEE HOLDS HEARING ON THE EFFECTS OF RENEWABLE FUEL STANDARD

As you may know, President Bush has pushed for increased production and distribution of ethanol in gasoline. The Senate recently held hearings to discuss the Renewable Fuel Standard included in the 2007 Energy Bill.

Senator Bingaman (D-NM), Chairman of the Senate Energy and Natural Resources Committee, raised concerns over the recently passed energy bill, H.R. 6, which drastically increases the Renewable Fuel Standard (RFS) to 36 billion gallons by 2022. The chairman stated that the mandates might be too aggressive and questioned the availability of biofuels to meet the new mandates since cellulosic ethanol plants are just getting started and are not commercially ready for use.

Senator Bingaman was concerned that the EPA would have difficulties implementing rules to achieve the aggressive mandates and stated that technical corrections to the RFS expansion will likely be needed. New regulations have to be in place within one year of the energy bill’s passage, which is going to be extremely hard to accomplish given the circumstances. Charles Drevna, President of the National Petrochemical and Refiners Association, highlighted to the Committee that all the talk about how ethanol will solve our nation’s dependency on foreign oil is not the final answer. He cited that it costs 13 to 18 cents a gallon to transport ethanol compared to conventional gasoline, which only costs three to five cents.

Automatic Temperature Compensation

ATA letter to NCWM

The American Trucking Association (ATA) has told the National Conference on Weights and Measures (NCWM) that they are opposed to a national Automatic Temperature Compensation (ATC) retail mandate. ATA believes that due to the competitive nature of the retail motor fuel industry, inventory shrinkage or expansion is accounted for in the retail pricing of diesel, and “any impact of temperature variances is eliminated through competitive pricing.” ATA also voiced concern that the cost of the installation of temperature compensation devices would increase the retailer’s cost of goods and ultimately be passed on to the consumer. “For this reason, ATA is concerned that the installation of ATC devices is a solution that may be more expensive than the problem it is trying to address”.

As some may know, the energy content of gasoline fluctuates with the temperature. One gallon of gasoline is measured as 235 cubic inches at 60 degrees (238 cubic inches in Hawaii).  As the temperature rises and falls above or below 60 degrees, your vehicle gains or loses miles per gallon.  On average the amount of energy lost in winter is equivalent to a teaspoon.

ATC has caught the attention of the NCWM after several congressional hearings. Rep. Dennis Kucinich (D-OH) called several hearings and tried to drag the leaders of Exxon and Shell to testify on the matter.  Congress was alerted to the issue by several articles in the Kansas City Star after truck drivers noticed they got fewer miles per gallon after filling up at a particular truckstop out west.

If the NCWM approves mandated or permissive ATC, we will also see the cost of gasoline rise.

The Petroleum Industry and You

When the news doesn’t talk about the presidential election, it talks about the price of gasoline.  I think it is important to understand how gasoline gets to $3/gallon and what that means for you.

The largest misconception of the petroleum industry is that it is dominated by Big Oil. But ExxonMobil, Shell, Texaco, etc. operate less than 5 percent of retail gasoline stations. They realized it is more profitable to sell or lease those assets to the people who live in your neighborhood. My organziation operates a program called Neighbors Serving Neighbors to remind and educate the community that they are buying gasoline from people in the neighborhood and not Big Oil.  The employees are not employed by the brand. 

There are several pressures on retailers that can drive the price up.  When you purchase a gallon of gasoline with a credit card, the credit card company makes 2% on the transaction, that is 6 cents/gallon at $3 gasoline, almost more than double what the convenience store owner makes on a per gallon basis.  

The federal government has not made it easier to sell gasoline either. From regional blends to confusing compliance requirements, various federal agencies and departments contribute to raising the cost of business.  For example the EPA requires special equipment at the pump to prevent ground-level ozone. 

To learn more about what contributes to rising gasoline prices and what that means for you, I am scheduled to speak to the Wednesday Republican Breakfast Club, Jan. 30 at 7:30am at the Eastport Yacht Club.