[Mb-civic] Article on gas price cap

[Harold Sifton]

Gulf Oil Chief Proposes Price-Cap Program 
By MARK PRATT, Associated Press Writer Fri May 12, 8:00 AM ET 

BOSTON - Joe Petrowski would like nothing more than to see gasoline prices drop like a rock. But if they don't, the chief executive of Gulf Oil LP thinks he's hit upon a plan to help mitigate sky-high gas prices for the average driver. 


Petrowski is working on creating price-cap and price-lock systems similar to programs that home heating oil companies have been offering for more than a decade to protect consumers from severe price spikes.

The goal is to create better brand loyalty in what he calls the "fiercely competitive" retail gasoline business.

"We want to give customers choice and lock in volume for Gulf stations," said Petrowski, who has been CEO of the Chelsea, Mass.-based regional fuel products wholesale distributor for about eight months. "We want to create a loyalty program."

The first aspect of Petrowski's program, reported Thursday by The Patriot Ledger of Quincy, would allow consumers to buy prepaid cards for a certain amount of gasoline at a set price. If the price at the pump rises, the card holder would still pay the lower price they locked in with their prepaid card.

"If the price goes up, you have locked in your price," he said. "You wouldn't have to use the card if the price of gas went down."

The second aspect of the Gulf plan is a cap system for its credit card holders, in which drivers pay a nominal per-gallon fee to guarantee a ceiling price. If prices drop below the ceiling, consumers could still use their cards to buy gasoline and not pay the fee.

Petrowski said there are still multiple hurdles to overcome, including complying with different regulatory requirements in the 11 states where the company's more than 1,800 franchised stations are located.

The programs would at first be available only in Gulf stations, but Petrowski would also like to expand it into the 600 Exxon stations for which it owns franchise rights in New England and New York.

The company also plans market research to determine the public's interest. Petrowski hopes to roll out the programs, which would be available to individual consumers as well as fleets, by late this year or early in 2007.

Gulf would protect itself by buying futures contracts as customers signed up for the program.

There is no downside, Petrowski said. The company wins, consumers win, and gas station owners win.

"Franchisees will love it," he said. "They won't lose anything. They won't be hurt. They won't have to do any hedging, we'll do all that."

Petrowski's plan is not the first of its kind, but it may be the biggest. First Fuel Banks in St. Cloud, Minn., which has just six stations, has allowed customers to lock in prices for years.

But if Gulf's plan works, more large oil companies are likely to try it, said Peter Beutel, president of Cameron Hanover, an energy risk management firm based in New Canaan, Conn.

"It's something we're going to see a lot more of," Beutel said.

People will try to protect themselves from recent price spikes that saw the price at the pump climb to well over $3 per gallon in some areas of the country, he said.

"It wouldn't disappoint me if gas drops back down to $2 gallon and no one was interested in this," Petrowski said. "But if it doesn't, this way we're going to create the ability at the station to fix the price of gasoline
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