Yesterday, the Senate Committee on Energy & Natural Resources held a hearing on gas prices. The testimony
offers a nice overview of some of the issues and perspectives
surrounding rising gas prices. Of specific interest, the
representative for the National Association of Convenience Stores
challenged accusations of “price gouging.” He explained the
retail pricing process, in part explained by the following:
It
is important for this committee to understand how I and other gasoline
retailers establish our retail prices in a market with escalating
wholesale prices. Simply stated, I try to set my prices on the basis of
the replacement cost of the gallons I have at my outlets. This is an
important concept which may not be readily grasped. When wholesale
prices are rising, and I know that the next load of gasoline I purchase
from my supplier will cost me substantially more than my last load, my
sales must generate sufficient cash for me to make that next purchase
and
to pay my supplier.
