Inching Closer to $1 Gasoline

Anything seems possible as prices continue to soar

Gasoline might hit a dollar a gallon in the next three or four years, Energy Secretary James Schlesinger predicted last month. For once he was being optimistic. Even before any of the newly inflated Arab oil has landed on U.S. shores, gasoline prices in some parts of the country are already reaching for the one-dollar mark.

Prices of 73.5-c- per gal. for unleaded were common in Miami last week, as were 77.9-c- per gal. in Atlanta and 78.9-c- per gal. in Jackson, Miss. Dealers in New Jersey were asking 71.9-c- per gal. for unleaded, and in New York City 88.9-c- per gal. for unleaded was posted on at least one pump. In Chicago a gallon of Amoco premium unleaded has been going for 96.9-c- per gal., up 5-c- in a month. Says a philosophical Mobil station manager in Manhattan: "Customers get upset, but they pay anyway. They grumble, but what can they do?"

Motorists are perplexed by the price differences that they notice from region to region, city to city and even block to block. The reasons for the discrepancies are complex and varied. Taxes can make a big difference. In Chicago myriad federal, state, county and sales taxes add up to about 17-c- per gal. (the federal tax alone is 4-c-). But in Houston levies total only 9-c-, and lucky motorists there were tanking up on regular last week for only 60.9-c- per gal. at self-service stations. Freight charges vary from next to nothing in an oil-producing state like Texas, to as much as 2.5-c- per gal. for deliveries by some oil majors to Rocky Mountain regions.

Each major oil company charges almost exactly the same wholesale price to all its franchised dealers. Exxon's price to its dealers throughout the U.S. varies by as little as tenths of a cent a gallon for the same grade of gas. But the wholesale price can differ drastically from company to company. In Houston, for example, Exxon sells unleaded gasoline to its service stations for 56.9-c- per gal. and Phillips for 65.1-c-, while Shell charges 61.8-c- for its premium unleaded. The oil companies have no control over the price at the pump. That is set by the individual franchise dealers, which is why the same brand of gas can vary widely from station to station.

Fully 62% of all U.S. service stations are now self-service operations, but the minority of dealers who offer full service tack on a few cents a gallon for pumping the gas, checking the tires and wiping the windshield. Many station owners still try to hold prices down in order to achieve high volume. "Rocky" Minetti, who manages an Esso station in Pittsburgh, maintained his price of 64.9-c- per gal. for unleaded right up to the end of last week, while ether stations in his area were charging 68-c- to 75-c- per gal.

His business doubled in seven days. Healthy competition can keep prices from rising, but competition is sharpest when there is a surplus of gasoline and weakest now, when supplies are tight.

The Government supposedly controls gasoline prices at all levels of the business; dealers are permitted markups based on their margins in 1973. But the formulas are complex, the nation's 250,000 service stations are tough to police, and many owners are marking their gas up to levels well above their individual federal ceilings. Fines for those gougers who fail to post prices properly are as high as $10,000 per day for each violation, but last year only about a dozen operators throughout the country were penalized by the Department of Energy.

Who is profiting from the increases?

Like a circular firing squad, people in each sector of the gasoline business point to those in the other. All the major companies have raised their wholesale prices, and there is endless debate over whether or not these increases are justified by the rising costs that the firms must pay for oil. Since early November, Exxon has boosted its wholesale price for regular gas by 4.3%, to 47.9-c- per gal.; Mobil has lifted its price 10% to 51.9-c- per gal. and Amoco 11.4% to 50.6-c- per gal. The service station dealers then normally pass these wholesale increases on to their retail customers. The station owners commonly add 10-c- or more to the wholesale price in order to maintain their own margins. For many stations, these margins are not enough to keep abreast of inflation. Others can only offset a relatively small profit at the pump through their lucrative automobile service operations.

The Government has eased its controls lately so that dealers may now pass their increased costs for rent on to consumers. The DOE'S new "tilt" clause offers much the same opportunity to the oil companies. Enacted three weeks ago, the measure will allow oil companies to pass their higher gasoline refining costs on to the dealer, thus probably setting off a new round of rises for the nation's drivers.

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