Why Is Alabama Gasoline So Expensive?

In a word, because of the state legislature.

Here’s an explanation.

In Alabama, an anti-competitive law prevents motorists from enjoying low gas prices. This is the price per gallon of a gallon of regular gas purchased at a Kroger Fuel Center in Texas, after using Kroger Fuel Discounts.

In Alabama, a law called the “Motor Fuel Marketing Act” (Code of Alabama §8-22) prevents retailers from selling gasoline (or any other motor fuel, such as diesel) for less than what it costs them to purchase it.

Specifically, the law reads in part, that:

Section 8-22-6

Certain below cost fuel sales prohibited.

It shall be unlawful for any person engaged in commerce in this state to sell or offer to sell motor fuel below cost or to sell or offer to sell it at a price lower than the seller charges other persons…”

In other words, it’s illegal to do that.

The marketing technique of retailing something for less than it costs to purchase it wholesale is called “low-price, or loss leader” and used in the hope that it attracts customers to a store where the retailer hopes the customer will spend more money with them while there.

Here’s an example: A grocer buys a case of toilet paper for $20, and sells it for $10.

The retailer takes a loss on a selected item (in this example, toilet paper), in the hope that the customer will purchase more items while in the store, and thus, increase the retailer’s profit.

But in Alabama, it’s illegal to do that with gasoline, or other motor fuels.

Here’s where it negatively affects families.

Some grocery stores – such as Kroger, for example – have “discount cards” that when swiped at the checkout counter compute a discount on the items purchased. If you don’t have a card, the clerk will often swipe one for you as a courtesy. As well, according to the total you spend, you can accumulate “points” which can translate into a per-gallon discount on gasoline. (Here’s a quick video on how the Kroger Fuel Rewards program works).

“The Kroger fuel program allows you to receive savings of up to $1 off per gallon on fuel purchases at Kroger and 10¢ per gallon at participating Shell Stations. You may redeem 100 fuel points at participating Shell Stations for a 10¢ per gallon savings. And you may redeem up to 1,000 fuel points in a single fill-up at Kroger for up to $1 off per gallon. For each increment of 100 fuel points redeemed at Kroger, 10¢ per gallon will be awarded. Program discount is good for one purchase of fuel, up to 35 gallons. Credit and debit card fraud prevention policies may limit transaction at the dispenser. Offer cannot be combined with any other discounts.”

For example:
• 100 fuel points = 10¢ per gallon of fuel for 1 fill-up at participating Shell Stations.
• 100 fuel points = 10¢ per gallon of fuel for 1 fill-up at Kroger.
• 200 fuel points = 20¢ off per gallon of fuel for 1 fill-up at Kroger.
• 1,000 fuel points = $1 off per gallon of fuel for 1 fill-up at Kroger.”

A Kroger Plus Shopper’s Card.
Photo by Amanda Rossmann, The Cincinnati Enquirer

But, that’s only good in other states, such as Tennessee, Texas, Georgia, Mississippi & Florida, etc. – NOT in Alabama.
To reward a customer by discounting their gasoline purchase would violate the Alabama Motor Fuel Marketing Act.

In 2004, former Speaker Pro Tem of the House of Representatives Demetrius C. Newton (D-Birmingham, March 15, 1928 – September 11, 2013), wrote to the Federal Trade Commission and “asked the staff to comment on the AMFMA, especially with respect to its impact on consumers.”

In their letter of response dated January 29, 2004, which “represents the views of the staff of the FTC’s Bureau of Competition,” they summarized that, “the Act likely harms consumers and restricts competition. Moreover, the Act is unnecessary because the federal antitrust laws already protect against anticompetitive predatory pricing and price discrimination.”

Speaker Newton had drafted a bill which would have repealed the AMFMA, but the bill never got out of committee, and thus, was never voted on by the legislature.

It’s odd that a state which claims it has “family friendly,” and “business friendly” conditions would harm it’s families and businesses by keeping a law that “harms consumers and restricts competition.”

Even more sadly, the Republican-dominated Alabama State Legislature shows no signs of repealing that law.

Go figure.