“It is our business to puncture gas bags and discover the seeds of truth.”
~ Virginia Woolf, “Thoughts on Peace in an Air Raid”
Here at GiN, it’s been clear to us for some time that the current City government is less than friendly to business. We pointed this out in articles discussing the months-long siege of the Centennial Mall by Occupy Lincoln. Prior to that, in a packet of research we presented to the members of the Unicameral’s Business & Labor Committee during hearings regarding CIR reform we noted that Lincoln doesn’t have a surplus of private industry. One out of four Lincolnites works for state or local government. In other words, the number one industry in our city is government.
That need not necessarily be the case, even though we are the seat of State Government and the home of the University of Nebraska. We could truly thrive as a hub of private industry if we created a climate that is friendlier to business.
Because this subject has been a topic of running discussion here at GiN from about day one, when the election year baloney started coming from City Hall, we labeled it for exactly what it was: Mayor Beutler, the Democrat City Council members, and a contingent of supportive left-wing “organizations” clearly decided to take aim, specifically, at a local businessman and, in the process, decided to send a hostile message to all business in the City.
Under the guise of “good government” and “transparency”, the anti-business machine kicked into high gear to push for an amendment to the City Charter that would prohibit anyone with an ownership interest in a business from holding a City contract. Their message is clear. Business owners – we don’t want you on the City Council.
We’ll spend a bit more time on this ordinance in another article, but, suffice it to say that the whole “good government” amendment effort was a thinly-veiled tactic to obstruct Mark Whitehead from filling Adam Hornung’s vacant seat even though Hornung recommended Whitehead as his successor. It has been the traditional practice on the Council for some time to appoint a retiring council person’s choice for a replacement to finish out his or her term. That was the manner by which Dianna Schimek filled a vacancy created when Jayne Snyder resigned her seat on the Council for health reasons.
While it seems like fundamentally bad P.R. for a City’s controlling political party majority to turn on a siren that blares, “WE HATE BUSINESS”, desperate political times apparently call for desperate political measures.
On Friday, the local ABC news affiliate, Channel 8 KLKN, opened their broadcast with a glowing report about the early completion of the arena project – a projection at this point1 Speaking of projections, the Mayor, et al, also claimed that the arena is not only coming in on time, it’s coming in under budget. Deena Winters, who covered the arena issue while it was under consideration and debate while still at the Journal Star, reported on the Nebraska Watchdog site that the entire project is actually over budget, not under., – which gave incumbent City Councilman Eugene Carroll, an excellent P.R. opportunity.
And that’s where the desperation comes in: Carroll, the only incumbent in what was a seven-person race, came in sixth in the Primary, which, historically, means he’s unlikely to win one of the three At Large seats on May 7.
For whatever the reason, Democrats generally believe they should target Republican candidate Mark Whitehead, and only Mark Whitehead, even though there are two other Republicans in the race.
Immediately following the “Arena Update” story on KLKN featuring Carroll, KLKN moved to Vince Powers, Democratic Party Chairman, who had called a press conference that day to demand answers from Mark Whitehead regarding why gas prices in Lincoln are so much higher than those in Omaha:
“‘We know they get their gas from the same terminal,’ Powers said. ‘We know that those prices are the same or within half a cent of each other. We know that the only explanation would be he’s gouging.'”
The amount of time KLKN gave to Vince Powers versus that given to Mark Whitehead was obviously out of balance. While Whitehead was able to explain some basics, it seemed to me, in watching the report live, he’d likely said more that ended up on the KLKN cutting room floor (metaphorically speaking, of course, since no one uses videotape anymore).
Because I watched the story live and was shaking my head in disbelief that KLKN would provide Vince Powers with the opportunity to spew obviously politically-motivated gibberish which at minimum, required some vetting before it aired, I decided to get in touch with Mr. Whitehead to ask whether his full remarks had made it on TV. I wasn’t surprised when my suspicions were confirmed.
It does turn out though, following Powers’ accusations, Whitehead spoke with the Lincoln Journal Star, in what he told us was a fair report. We can’t disagree (but I will declare a caveat, which I will explain at the conclusion of this article).
It’s crystal clear what’s at work here – as usual, a political party – most often it is the Democratic Party – is pushing peoples’ emotional buttons. It’s a known issue – gas prices – and there are ongoing frustrations with the disparity between Omaha and Lincoln prices.
Here are some “Economics 101” items, bullet-pointed, which are taken from the Journal Star interview with Whitehead, Linda’s conversation with him, and a very few items added by me, which I’ve marked with an asterisk:
- Whitehead Oil does not have a corner on the market; it owns less than 25% of the Lincoln gas market
- The gasoline retail market operates on thin profit margins, as do grocery stores*
- Whitehead Oil sells a particular blend of gasoline which was deliberately chosen for its higher quality, but the price is still competitive in the market2 For more information on oil blends, see Top Tier Gas, where you will find an explanatory video and a list of retailers who sell gas blends of higher quality, meaning they exceed EPA standards.
- Whitehead and his competitors operate within the Lincoln market and compete against each other3 As previously noted, Whitehead Oil doesn’t own the entire Lincoln gas market, the company’s competitors also operate in the Omaha market. Whitehead’s competitors sell their gas at lower prices in the Omaha market, so, if Vince Powers is demanding answers, perhaps his questions would be better directed to the other companies in Lincoln.
- To expand on this prior point: Lincoln doesn’t have national vendors as does Omaha, so losses in some cities where operating costs may be higher than in others, cannot be offset by higher profits elsewhere (the circle is smaller) *
- Few – are there any? – people would drive as far as Omaha to fill up with gas, therefore Omaha is not a direct competitor. In contrast, the Omaha market has competition within and from without – Council Bluffs is immediately across the river
- The Omaha and Lincoln markets get their gas from different terminals, not the same one as Vince Powers claimed4 According to Mark Whitehead, the Omaha terminal, on average, prices their gas a little less than 2 cents per gallon cheaper than Lincoln. The Lincoln Journal Star indicated that the average price spread is about 3 cents.
- Due to a request from then-Mayor Colleen Seng, Attorney General Jon Bruning conducted an evaluation of prices in 2005 and found no evidence of gouging
A couple of “Economics 301” ideas added by me – if “101” is the traditional high school course…you get the idea:
- Oil prices have been particularly volatile since 2008, which makes doing business in this industry even more difficult
- Since the Federal Reserve has kept interest rates so low for so long, many investors (including Mom & Pop types with retirement funds) are having a hard time earning money in more traditional and stable investments and have moved into the commodities market, where oil is sold, which drives up prices
To be clear, we don’t endorse candidates and this article wasn’t written for the purpose of promoting Mr. Whitehead. We encourage voters to do their homework and make their own decision. I am provoked by the bizarre laser beam focus on this one candidate and the ideology that seems to be motivating it. Remember that this article started with a reference to Occupy Lincoln? Countless laws were broken to protect a group whose adopted motto was “Eat the Rich”. How different is this?
Whatever is particularly driving this absurdity, I’ll conclude with some observations for Mr. Whitehead’s consideration, win or lose, but especially if he wins. This recommendation is part of that caveat I noted about the Journal Star article (they didn’t touch this subject and they’re happy not to):
Mr. Whitehead didn’t think taxes were a significant factor in explaining the price disparities between Lincoln and Omaha. It may well be that the specific gas tax differences between the two cities in and of themselves don’t add significantly to the difference, based on the whole picture.
Perhaps our question was not detailed or broad enough. Certainly, we meant gas taxes, as one factor, but should have asked more questions about taxation overall, as well as any differences in regulations, etc.
- Taxation levels in Lincoln overall, including the 24% telecom tax, necessarily add to the overall cost of doing business here. What impact does it have?
- There is a disparity between Iowa and Nebraska gas taxes which is a factor in competition between Omaha and Council Bluffs; the Iowa rate is currently 40.4 cents, Nebraska’s 43.9 cents. What are the differences between Omaha and Lincoln, if any?
- We would ask why there are no national companies doing business in the City as there are in Omaha, and point to the same phenomenon in the grocery market (outside of specialty organics and big box stores like Walmart). Since both industries operate on thin profit margins the question must be asked: what costs are destroying the profitability of doing business in Lincoln so that more companies don’t come here to compete in these industries?
“We Are the 99%” taken from Occupy Lincoln’s Facebook page in 2011
Nebraska Democratic Party logo, NDP Twitter profile
Mark Whitehead and family photo from candidate’s “About” page
“Occupy Desperation” created by GiN – permission to use granted, IF attribution and link to site are included
References & Notes [ + ]
|1.||↑||Speaking of projections, the Mayor, et al, also claimed that the arena is not only coming in on time, it’s coming in under budget. Deena Winters, who covered the arena issue while it was under consideration and debate while still at the Journal Star, reported on the Nebraska Watchdog site that the entire project is actually over budget, not under.|
|2.||↑||For more information on oil blends, see Top Tier Gas, where you will find an explanatory video and a list of retailers who sell gas blends of higher quality, meaning they exceed EPA standards.|
|3.||↑||As previously noted, Whitehead Oil doesn’t own the entire Lincoln gas market, the company’s competitors also operate in the Omaha market. Whitehead’s competitors sell their gas at lower prices in the Omaha market, so, if Vince Powers is demanding answers, perhaps his questions would be better directed to the other companies in Lincoln.|
|4.||↑||According to Mark Whitehead, the Omaha terminal, on average, prices their gas a little less than 2 cents per gallon cheaper than Lincoln. The Lincoln Journal Star indicated that the average price spread is about 3 cents.|