[Congressional Record (Bound Edition), Volume 146 (2000), Part 16]
[Extensions of Remarks]
[Page 23046]
[From the U.S. Government Publishing Office, www.gpo.gov]


[[Page 23046]]

                          EXTENSIONS OF REMARKS

   THE WHOLESALE MOTOR FUEL FAIRNESS AND COMPETITION RESTORATION ACT

                           HON. MIKE THOMPSON

                             of california

                    in the house of representatives

                       Tuesday, October 17, 2000

  Mr. THOMPSON of California. Mr. Speaker, today I am introducing the 
``Wholesale Motor Fuel Fairness and Competition Restoration Act, '' 
legislation designed to restore fair and competitive practices to the 
wholesale sale of motor fuel.
  Beyond the per barrel price of crude oil, there are a number of other 
factors that influence the retail pump price Americans pay for gasoline 
and diesel fuel, including those related to supply, refining, consumer 
demand and, most important, oil company cost, pricing and marketing 
practices.
  Several cost, pricing and marketing practices employed by the oil 
companies are unfair and anti-competitive and contribute to the 
unjustified price Americans pay for fuel. Under the bill I am 
introducing today, many of them would be expressly prohibited, if not 
made more difficult. These practices include price zoning, redlining, 
discriminatory wholesale fuel pricing, and a complex and complicated 
system of cost allocation the companies use that hide the factors on 
which wholesale costs are based and published.
  Mr. Speaker, for too long, the residents of California's First 
Congressional District have paid too much for gasoline. For more than a 
year, they have paid some of the highest pump prices of any region in 
the country. For more than a year, they have paid well above $2-a-
gallon for regular unleaded gasoline. Many others across the nation 
face similar unjustified pricing.
  Last month, I met with U.S. Energy Secretary Bill Richardson and 
brought to his attention the unfair situation that confronts the 
residents of Northern California. I made it clear that I and my 
constituents were not satisfied with the degree of attention the 
Department was paying to gas prices in Northern California and I sent 
both him and the President letters urging them to improve their 
scrutiny of oil company practices in California.
  Nonetheless, it is clear from my discussions with fuel distributors 
and independent retailers that the wholesale motor fuel market is 
unfair and anti-competitive. An independent fuel distributor in my 
district recently related to me that he is charged a price at the 
terminal facility that is sometimes 30 cents higher than the price 
charged to company-owned or franchise distributors. Yet, his profit 
margin on a gallon of gasoline is at times less than one-half a cent!
  Another district resident who owns a number of gas stations is also a 
victim of some of these predatory pricing practices, but in a different 
way. In his situation, because of pricing discrimination, he buys motor 
fuel at a high wholesale price and is forced to sell it for less than 
he paid for it in order to remain competitive.
  The bill I am introducing today seeks to stop these unfair and anti-
competitive practices.
  The ``Wholesale Motor Fuel Fairness and Competition Restoration Act'' 
addresses several of the major factors that have been identified by 
industry experts as contributing to the unfair and unjustified pricing 
of gasoline, including discriminatory pricing, red-lining, price zoning 
and company ownership of retail stations.
  Discriminatory pricing occurs when terminal facility owners and 
operators charge different prices for gasoline depending on the type of 
contractual relationship that the station has with the refinery. In my 
district for example, motor fuel sold through an oil-company owned 
station wholesales is sometimes twenty to thirty cents less per gallon 
than motor fuel being sold to an independent. This is patently unfair 
and anti-competitive.
  Price zoning is a long-standing oil company practice of setting 
artificially high or low prices in certain areas to either maximize 
profit or impede competition. If a particular city or even a particular 
intersection is deemed to be especially profitable, oil companies will 
artificially inflate the price to gouge consumers or artificially 
deflate the price to driver competitors out of business. This, too, is 
unfair.
  Redlining is the practice engaged in by a terminal facility of 
refusing to sell motor fuel to a particular retail outlet that in some 
cases had previously purchased fuel from that facility in an effort to 
eliminate or harm competition.
  The ``Wholesale Motor Fuel Fairness and Competition Restoration Act'' 
uses a two-pronged approach to address these unfair practices. First, 
it requires full disclosure by oil companies of their wholesale pricing 
practices. This means that oil companies will be required to reveal 
their pricing structure, including rebates, refunds, and discounts, so 
that the American people will finally be able to most fully understand 
how these companies arrive at the price on the gas station sign. 
Currently, much of this information is not publicly available nor is 
collected by the Department of Energy's Information Administration.
  Secondly, this bill will make it illegal for companies to 
discriminate on price. It does this by requiring that the price charged 
at the terminal facility, where gasoline is loaded on tanker trucks, is 
the same regardless of who is purchasing it. By eliminating the price 
discrimination between company-owned stations, franchisees, and 
independent operators, it will for the first time introduce a level 
playing field into the motor fuel marketplace.
  The third component of this legislation addresses oil company 
ownership of gas stations by mandating the Federal Trade Commission to 
undertake a study into the relationship between ownership of gas 
stations and the high price of motor fuel.
  In Humboldt County, California, pump prices continue to exceed $2.00 
for a gallon of regular (unleaded) gasoline, evidencing the unique 
position of the major oil companies to exert undue influence on the 
price of motor fuels. In California, the six major refineries in 
California control 92% of all oil refining in the state, whereas the 
top six refineries in Texas control only 60% of that state's gasoline 
production. This inordinate market domination allows companies to 
practice discriminatory pricing practices that favor some customers 
over others. It allows them to target certain markets in order to gain 
unfair advantage and drive out competitors. It is the kind of market 
practice that warrants the bill I am proposing today.
  Mr. Speaker, the Wholesale Motor Fuel Fairness and Competition 
Restoration Act will restore fairness and competition to the motor fuel 
industry, not just in California but across the nation. I urge its 
prompt consideration.

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