Tuesday, June 06, 2006

Self-Service Gas Stations

Over at the Social Econ blog, my good friend Bryce brings up the issue of full-service gas station laws, which was raised in a typically hilarious piece from Ed Helms last night on The Daily Show. (Here's a link to Ed Helms' bits. The gas-law one is entitled "Pump My Ride.") The piece focused on pending legislation in New Jersey to allow self-service stations; currently New Jersey and Oregon are the only states in the nation that mandate full-service stations (i.e. you can not pump your own gas, even if you want to do so).

We've had many debates about this. I can not understand how restricting choice on this issue can possibly be to the social good; Bryce disagrees. As a native Oregonian, he's pro-full-service law, and he lays out his argument in his post. (Interestingly, in Oregon it is legal to pump your own diesel gas.)

Some points:
  1. According to a recent FTC report on gasoline pricing and a letter from the GAO to Oregon Senator Gordon Smith, the ban on self-service stations adds two to five cents per gallon to the cost of gasoline. (See page 113.)
  2. Strangely, the same FTC report seems to indicate that motorcycle operators can pump gas in Oregon. (See footnote 28.)
  3. Oregon consumed 4.2 million gallons of gasoline per day in 2002, and New Jersey consumed 11.1 million gallons per day in 2002. If we assume no elasticity, then a 2.5 cent per gallon effect of the full-service laws would mean $38 million/year in Oregon and $101 million/year in New Jersey. That's a lot of money.
Now, what about bundled goods? Bryce argues that even if people prefer to pay a little extra for full service, they can't get it because gas stations instead offer self-service plus a convenience store. And they do this because it is more profitable to get people to come into the store and buy chips, sodas, candy, etc. This strikes me as just an end-around that ends up back at the "if people wanted it, the market would provide it" argument it is meant to defeat.

Let's say that what Bryce says is true; we see very few full-service stations because of this bundling effect. Doesn't this just reveal that people prefer self-service + candy & soda to full-service at slightly higher prices? The only way it doesn't is if we think that people are systematically making mistakes. [This may be. Maybe Oregonians know that they won't be able to resist buying soda and candy so they vote to ban self-serve stations. We should be able to see if they are thinner than average or something like that as evidence of their ability to legislate around such problems. Of course, this is certainly not true of New Jersey, so maybe not...]

Unfortunately, I can not find any data on the relative abundance of self-serve versus full-serve gas stations across the country. So it's hard to argue about how many full-serve stations there would be in the absence of Oregon's or New Jersey's law. The closest I could get was this article that says that 93% of people use self-service in the other 48 states. Of course, it doesn't say what fraction of the 93% would like to use full-service.

But I still just don't see the real market imperfection that requires government intervention like this. Bryce seems to imply that the sales at gas-station convenience stores are something we should legislate around in order to maintain full-serve stations ("it only takes a small fraction of people succumbing to the allure of convenient sugar, fat, nicotine, and gambling to make it worthwhile to force everyone to get out of their cars"), but I disagree. If we think that people buy too much of this stuff, fine, let's give it the ole' Pigouvian tax, but let me pump my own gas.


Anonymous Anonymous said...

dude, that Ed Helms clip was incredibly funny. I'm never going to pump my own gas again, lest I slip on a pool of gas and slide under the car and then have the brake fail so that I'm crushed.

6/06/2006 8:10 PM  
Anonymous Anonymous said...

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7/07/2006 5:55 AM  

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