ST. PAUL, Minn. -- Minnesota Governor Tim Pawlenty and some state lawmakers want to save Minnesotans money at the pump by repealing a state law that sets a minimum gasoline price; however, a new study shows a repeal would send prices higher, reported the St. Paul Pioneer Press.
Pawlenty sent letters to lawmakers last week seeking their interest in a special session. Among the topics to be considered would be repealing a section of the Minnesota restraint of trade law that requires retail gasoline stations to charge 8 cents per gallon above the wholesale [image-nocss] cost of the gasoline and all taxes.
A repeal would save consumers money and increase competition, those in favor of the repeal argue. But three professors completed studies this year comparing, for the first time, gasoline prices in states that have minimum-price laws with prices in those that do not, said the report. The studies examine monthly gasolines prices from 1983 through 2002 throughout the United States.
The states with minimum-price laws like Minnesota's had lower gasoline prices than states without the law, said Jimmy Peltier, a marketing professor at the University of Wisconsin-Whitewater, who cowrote the study that was released in a peer-reviewed economics journal this year. Another study coming out next month shows the states with the law have fewer stations going out of business than the national average, Peltier said.
It's true it's counterintuitive, he told the newspaper. But it's preservation of competition. All over the world it has been shown that the more competition, the lower the price.
This was not the first time the group had taken a closer look at Minnesota gasoline prices. An earlier study singled out Minnesota because it already had gone through repealing and reinstating the minimum-price law. When Minnesota and Wisconsin had the minimum-price laws before 1995, Wisconsin's gasoline was slightly cheaper than Minnesota's. After Minnesota repealed, the gap widened but then shrunk when the law was reinstated, Peltier said.
Minnesota had the minimum-price law for years before its repeal in 1995. State Senator Steve Murphy (DFL) led the charge to bring it back in 2001, according to the report. He did it because Wal-Mart wanted to sell gasoline below its costs to lure customers to its stores, Murphy said.
A lot of people are grousing right now because the price of gas is so high, Murphy told the paper. But it's not the minimum-price law that is doing it.
State Sen. Chuck Wiger (DFL) got a bill passed in the Senate last spring to repeal the law, but it failed in the House. The station owners were pretty upset, he told the Pioneer Press. I made the point that we don't regulate how much stores charge for lawnmowers or snowblowers. There are other tools for monopoly and price fixing that the attorney general can use.
State Representative Joyce Peppin (R) said she could not get the bill to repeal the law through the House, but she would like to try again in a possible special session or when the Legislature returns. It would help consumers and the state fleet, which purchases more than 8 million gallons of fuel a year, she said. The minimum-price law is anti-competitive and it hurts consumers, she said.
Wiger and Peppin point to an academically disputed Federal Trade Commission (FTC) letter to a Wisconsin Assembly member in 2003 in which the commission said Wisconsin's minimum-price law was unnecessary because other laws would protect consumers against predatory pricing.
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