san fran bill could hurt refiners

City Supervisor wants oil companies to sell off their company-owned gas stations within two years.

A San Francisco City Supervisor Tom Ammiano has introduced legislation that could radically alter the city’s gas station and convenience store market.

Ammiano proposed that oil refiners be required to sell off their company-owned gas stations within two years. The measure, the supervisor claims, could potentially save motorists money at the pumps by increasing competition at San Francisco’s 107 gas stations, which have long had drivers paying some of the highest prices in the country for gas.

“I strongly believe that The City needs to use our policing powers to protect consumers in what appears to be a noncompetitive market place,” Ammiano told the San Francisco Examiner.

According to the City Controller’s Office, the legislation “intends to stop refiners from price gouging by forcing them to sell their stations to either franchisees or independent operators” and, to the extent that more owners would increase competition, “this could put downward pressure on prices.”

However, the report questions how much of an effect the bill could have on gas prices. Refiners base the wholesale price of gasoline on the location of the gas station, a practice known as zone pricing, the report said. Prices are set based on the level of demand along with what consumers in that area are willing to pay.

“While entirely legal, price discrimination allows firms to earn profits above a purely competitive level,” the report said.

Filling up at the pump in San Francisco has long been more expensive than filling up elsewhere. This summer, drivers filling up their tanks in San Francisco were paying 4% more at the pump than the average cost of gas in the rest of California and 9 percent more than the nation, according to the Controller’s Office report. In November 2001, those filling up at the pumps in San Francisco were paying 17% more than the rest of the state and 35% more than the nation.

The legislation will be heard this week in the Board of Supervisors Rules Committee, the Examiner said.

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