Change in pricing of gas fuels discontent
April 15, 2007
In a way, overseas gas customers got what they wanted.
In a way, they didn’t.
More than two months ago, the Army and Air Force Exchange Service responded to a customer survey and started changing its fuel prices weekly instead of monthly.
The decision was in response to the main question the exchange posed to its customers: Would you like AAFES to change gas prices more often, less often or keep the current monthly policy? A majority of the more than 4,500 respondents asked the exchange to change prices more often, according to an AAFES news release issued in January.
An AAFES spokesman said it’s too early to come to any conclusions about the change. But, in a follow-up e-mail, the spokesman, Lt. Col. David Konop, wrote, “Initial feedback looks generally favorable.”
Even though they were asked in November to help shape the new policy, American motorists who spoke to Stars and Stripes about it weren’t all that excited — or informed — about it.
Those who noted the more-frequent price adjustments were focused on one fact: With the exception of the first week, the price of gas had gone up each time under the new policy.
The new pricing policy isn’t responsible for the rapid rise in prices — AAFES prices have gone up 64 cents in the past 10 weeks — but it does allow the volatility of the stateside gas market to be reflected more quickly at AAFES fuel pumps and in the cost of coupons motorists can use at certain service stations on the economy.
“Our customers wanted our prices to more closely reflect prices in the States and the weekly interval does this,” Konop wrote. In the States, gas prices also went up 64 cents during the past nine weeks, according to Department of Energy data.
Appeasing customersSpc. Jeremy Wooding, a member of the 72nd Signal Battalion based in Mannheim, Germany, was on temporary assignment when the new pricing policy went into effect. He wasn’t aware that prices were changing weekly until approached by Stars and Stripes. He did know of the complaints that led to the change.
Wooding suspected the rationale behind changing the frequency was to appease customers who had complained about AAFES’ prices not dropping quickly enough when prices dropped stateside. He also guessed these same people failed to take into account that changing the prices more often would also lead to prices climbing more quickly when U.S. prices did.
He’s right on both counts.
“The change to weekly was definitely intended to reduce the customer frustration and confusion when large [differences] between stateside and overseas prices occurred,” Konop wrote.
But that frustration didn’t come when AAFES’ prices were lower than stateside prices — which happened on occasion even though AAFES adds 16.6 cents to the price of every gallon sold in Germany to cover overseas dispensing costs. It came when AAFES’ prices were higher.
Now that AAFES’ customers — or at least those who were frustrated with the sluggishness of monthly pricing — got what they asked for, some wonder whether the change matters. Some even want the old system back.
“Every week when I go into the store, that’s the first thing I look at is gas prices,” said Michael Johnson, a civilian worker at the Benjamin Franklin Village post office in Mannheim. “Every Saturday, they’re going up.”
Johnson closely follows stateside gas prices and has a friend who works at AAFES and fills him in on local price changes, but he still feels blindsided by the new system. In the past he’d plan his gas coupon purchases — which can deliver significant savings if timed properly — on the once-a-month changes. Now he has to watch weekly where the prices will go, and hope they don’t drop the next week and wipe out any potential savings.
“I like the little warning they give us in the paper, but it doesn’t match up with payday,” he said. “This every-week thing is not getting it. Every month is better.”
‘Old way’ preferredPvt. Keon Christie was unaware of the policy change but, like Johnson, would have been happy enough to see AAFES leave the monthly pricing interval in place. One Thursday evening, when Christie was standing outside the Mannheim post exchange gabbing with friends, AAFES had already announced its prices were to increase about 10 cents at midnight Friday.
“I say we go back to the old way,” said Christie, who just resumed driving after recuperating from an injury. “At least if it goes up it goes up once a month.”
The price still would have gone up, though. Under the old policy, the March price for a gallon of regular in Germany would have been about $2.39. April 1, that price would have increased more than 28 cents to $2.67.
Doing the mathChristie might be disappointed to learn that AAFES has no plans to amend its pricing policy — such as going back to the old one — at this time, according to Konop. The fact is, however, that over time it doesn’t really matter whether AAFES prices its gas weekly or monthly.
Take, for example, U.S. gas prices in 2005, a volatile year for hydrocarbons thanks in large part to two devastating hurricanes. In 2005, the average weekly price for a gallon of regular gasoline in the U.S. was about $2.27. The monthly price for the same gallon — factoring in that some months are longer than others — also averages out to about $2.27.
A hypothetical stateside motorist who bought 20 gallons of regular gas every week on Monday at the U.S. average price would have spent $2,361.58 regardless of whether fuel prices were set using a weekly average or a monthly one.
The reason for that is the monthly and weekly averages are computed using the same data, which comes from the Department of Energy. AAFES uses the same data in figuring its prices. (See the DOE averages at http://www.eia.doe.gov/oil_gas/ petroleum/data_publications/ wrgp/mogas_history.html).
While AAFES doesn’t have enough information to know what effect the policy change will have on its bottom line, Konop wrote that customers are purchasing gas with cash and coupons at about the same rate as before.
“When the industry analyzes gasoline margins, it looks at a 12-month data range that takes into account a full season of price fluctuations,” Konop wrote, quoting John M. Griger, an automotive retail policy specialist for AAFES. “At this point in time we do not have enough data to analyze what the worldwide impact of the change to weekly pricing will be for all of our [overseas exchange] locations.”
Motorists don’t have to have a working knowledge of statistics to understand pragmatism.
“The price is going to be what it’s going to be,” Wooding said. “It doesn’t matter what I say or do.”
He’ll keep filling the tank of his 1991 Mazda 626 every two to three weeks to get him where he needs — or wants — to go.
“Americans, we’re creatures of consumption and desire” who aren’t going to change habits just because gas prices go up, he said.
“And,” added Spc. Dusty Deaver, Wooding’s friend and fellow member of 72nd Signal, “you kind of need gas.”