The Real Reason NJ Should Allow Self-Serve Gas: Not What You Think

August 25, 2015 · by igniweb · in

There’s been much ado about possibly repealing New Jersey’s long-standing ban on self-service gas stations. Some legislators claim that allowing NJ drivers to pump their own gas could save up to 10 cents per gallon, which could help offset the 23-cents-per-gallon increase lawmakers are considering to fund road repair projects.

It sounds like a decent trade off, but the claim doesn’t hold up against close scrutiny.

For starters, the 10-cent savings figure seems to be born from an unofficial average price differential between self-serve and full-serve pumps in most other states. However, we interviewed Jeff Lenard, Vice President of Strategic Initiatives at the NACS – the National Association for Convenience and Fueling Retailers, who told us that in reality, the savings are half that. “[F]ull serve adds about a nickel a gallon in labor costs,” he said.

State Senate President Stephen Sweeney (D-Gloucester) doesn’t think drivers would even get that much. He recently insisted he would never allow self-serve gas because retailers would turn any cost-cutting measures into additional profit at the expense of drivers. “You won’t see the savings because it just disappears,” he said.

Economists say he’s wrong, however. Patrick Emerson of the Oregon Economics Blog (Oregon also bans self-service gas) wrote that gas stations are incredibly competitive and that, barring some kind of regional collusion, gas stations would be under too much pressure to pass on the savings to drivers in order to entice more business. “[I]t doesn’t take very many gas stations to make a competitive market,” he wrote. “The reason for this is that gas is, for the most part, a completely generic product and price information is posted very visibly, so consumers are extremely price sensitive and thus to attract them, you have to compete fiercely on price.”

So would drivers save at least five cents on the gallon? Not necessarily. Gas stations with self-service pumps pay higher insurance premiums. In fact, this requirement is codified in New Jersey’s self-serve ban, statute 34:3A-4. Many claim that these premium increases would make any savings a wash, but Lenard disagrees. “The average station sells about 4,000 gallons per day,” he said. “[A]ssume 4,000 gallons times a nickel added cost, so liability insurance would have to increase by $200 per day or $75,000 per year to be a wash.”

No insurance providers would offer speculations as to how much more premiums would cost so while it’s clear there would be overall savings, it is difficult to determine just how much. Regardless, the question remains as to whether the amount saved would offset the investible job losses from allowing self-serve gas.

Emerson believes there would be an ultimate net gain because full-service mandates have “ambiguous effects on overall employment.” In addition, savings at the pump would flow through the local economy in other ways, such as increased business and consumer spending. This would in turn create jobs to be filled by those who are no longer pumping gas.

Some quick math supports this theory. Using conservative figures, savings as little as two cents per gallon would mean almost $30,000 saved per gas station. Multiply that by the more than 3,000 gas stations in the state and you have well over $90 million surging into the economy. If the savings are larger — closer to four-and-a-half cents per gallon — it would mean nearly $200 million in economic gains.

For the time being, all gas must be pumped by an attendant. Violating New Jersey’s self-service ban can result in a fine of $50 to $250 for the driver and/or the gas station owner. Contact an attorney if you or a loved one has been fined for pumping gas or for any other criminal offense in New Jersey. Adam H. Rosenblum of the Rosenblum Law Firm is a skilled criminal defense attorney with experience helping people in similar situations. Email the Rosenblum Law Firm or call 888-979-7551 today for a free consultation about your case.