The Barrel likes attending both the fall and spring meetings of the Society of Independent Gasoline Marketers of America. Many of the attendees are self-made men -- and they're virtually all men, at least the company owners -- or are second-generation owners of gasoline retailers or wholesalers.
And while much of the oil trade is focused on prices on the New York Mercantile Exchange, and whether the market is in backwardation or contango, or whether the long dated curve is going up or down, or what Goldman Sachs is saying in its latest prediction, the people at SIGMA are on the streets, every day, posting higher prices on their street-level sign even as their own invoices from suppliers continue to rise. (There are also plenty of tales of relatively low-paid cashiers facing the full wrath of customers objecting to paying $4 per gallon, as if it was the clerk who set the prices). Here are a few of the things they're saying now at their spring meeting in Hilton Head Island, South Carolina.
--The street margin can be very good. It can also be very bad. But what everyone says is that the volatility in current prices makes their traditional model of making money very difficult to follow. The Barrel threw out a theory: that continually rising prices means that the gasoline in tanks keeps climbing in value every day, making for some good, albeit temporary, market conditions. This opinion found almost no supporters. One marketer said his stations receive a new load of gasoline on average every 13 hours, and each delivery from a truck carries a price higher than the most recent delivery. With turnover that fast, any sort of "stale price arbitrage" becomes almost impossible.
--They scoff at official estimates that gasoline demand is down roughly 1% year-on-year. They see decreases of as much as 5%.
--The legislative affairs committee meeting is always one of the highlights of any SIGMA event. The forum covers everything from global warming to tobacco regulations. It is clear at this year's meeting that this is a group that very much believes the price of oil is being significantly affected by high levels of speculation in the market. The people who make up SIGMA's legislative affairs committee are too smart to believe the wildest stories of market manipulation. But they want a strong reaction by the Federal Trade Commission of Commodity Futures Trading Commission to do something, though the broader membership could not precisely agree what that might be SIGMA's comments in a federal rulemaking exercise where the FTC is seeking guidelines on just what constitutes "market manipulation." That call for comments come from a provision in the federal energy bill passed last year.
--While price-gouging laws traditionally have created real fear among SIGMA members, because price gouging is per se so ill-defined, the members were told that they no longer need to worry about new federal price-gouging legislation affecting them. Timothy Columbus, SIGMA's counsel from the firm of Steptoe & Johnson, told the meeting that "it has sunk in (to federal officials) that at the retail level it is competitive and you can't gouge anybody. So that part of it is going to be OK."
--A common theme is that one fiscal entity making a lot of money out of the current surge in prices is the credit card industry. The anger is directed primarily at Visa and Mastercard, whose fee structures are both fixed and variable, with the variable costs bringing in more money as the price of gasoline increases. In a document handed out at the meeting, SIGMA estimates that the fee is "typically about two percent of every credit card sales, though many makreters pay higher effective rates." Some marketers told the committee that credit card fees were higher than their profits. SIGMA has teamed with other retailers to look for changes, including support of a recent bill introduced in Congress that is aimed directly at Visa and Mastercard.
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