History is replete with examples of government doing business badly — take Amtrak, which lost more than $800 million in a decade selling overpriced food — but one Midwestern municipality decided to take on the free market this weekend despite the dangerous precedents.
The business: pumping gas.
The town of Somerset, Kentucky, opened a city-run filling station on Saturday, the Associated Press reported, offering gas to the public at below-market rates.
From the Associated Press:
The Somerset Fuel Center opened to the public selling regular unleaded gas for $3.36 a gallon, a bit lower than some nearby competitors. In the first three hours, about 75 customers fueled up at the no-frills stations, where there are no snacks, no repairs and only regular unleaded gas.
The mayor says the station was created in response to years of grumbling by townspeople about stubbornly high gas prices in Somerset, a city of about 11,000 near Lake Cumberland, a popular fishing and boating haven.
Four nearby stations in Somerset were selling regular unleaded for $3.39 a gallon Saturday. The prevailing price in town had been in the mid-$3.40s per gallon late in the week, said Melody Price, office manager at Somerset Fuel Center.
The city spent $200,000 to purchase the fuel storage facility a few years ago, the AP reported, and shelled out another $75,000 to convert the facility into a retail operation.
Some criticized the move, with one convenience store owner saying, ”They’ve used the taxpayer money that I have paid them over these years to do this, to be against us. I do not see how they can’t see that as socialism.”
But city leaders expressed commitment to the project.
“We are one community that decided we’ve got backbone and we’re not going to allow the oil companies to dictate to us what we can and cannot do,” Mayor Eddie Girdler told the AP. ”We don’t care if we don’t sell a drop of gasoline. Our objective is to lower the price.”
Whether the city-subsidized gas prices last or impact the private sector remains to be seen.
It’s worth noting that, while a city’s options may be limited, state lawmakers have another option when it comes to pushing gas prices down: cutting taxes.
According to the U.S. Energy Information Administration, taxes account for roughly 12 percent of the cost of a gallon of gas, while distribution, marketing and retail costs and profits account for only 9 percent of a gallon’s cost.
“Kentucky’s gas tax is 30.8 cents per gallon, the 18th highest in the country,” the Washington Times reported in late March.
According to the American Automobile Association, the average gas price in Kentucky on Monday was $3.682 a gallon, placing the state in the middle of the pack — much lower than states like California and New York, but much higher than states including Missouri and Oklahoma.
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