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Kentucky Town Beats High Gas Prices

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Earlier this month, the small city of Somerset, Kentucky drew national attention when it opened a municipally-owned and -operated fuel center in an effort to drive down gas prices for local residents. As a result of its proximity to Lake Cumberland, a popular tourist destination, the city of 11,000 residents has long struggled with high fuel prices-especially during the summer months between Memorial Day and Labor Day. Under the leadership of Republican Mayor Eddie Girdler, the conservative-leaning city purchased a fuel storage facility for $200,000 and spent $75,000 building the infrastructure to distribute gasoline to the public-including the installation of 10 pumps. The city now purchases gas from a local supplier (Continental Refining Company) and uses city employees who rotate in from other departments to operate the station.

In a city where gas prices at private stations can spike 20 to 30 cents a gallon on weekends, the public station will not aim to turn a profit. Rather the mayor's office intends to set prices in a way that the city breaks even on the cost of fuel plus operating expenses. However, an additional goal is to provide an incentive for motorists on their way to Lake Cumberland to stop in Somerset to refuel, thus generating additional business for-and greater tax revenues from-the city's restaurants, shops, and other small businesses.

Gas station owners and their regional and national associations (such as the Kentucky Petroleum Marketers Association, the Petroleum Marketers Association of America, and the Kentucky Grocers Association and Kentucky Association of Convenience Stores) have cried socialism and denounced the city effort as an attempt to "interfere with the free market." However, lower gas prices are proving very popular with local residents, and Mayor Girdler is showing no signs of backing down. "If government doesn't do it to protect the public, then who does it?" he told reporters. "It's the role of government to protect us from big business."

While Somerset's publicly owned gas station is the first of its kind in a good many years, it draws upon a rich tradition in the United States of municipal enterprises that reduce costs for local residents, provide services for those underserved or exploited by private operators, and allow for community participation in economic decision-making. Historically, municipal ownership and operation of strategically important industries and services was commonplace in America's cities. Often these included subways, trolleys, buses, power plants, power lines, telephone networks, water and sanitation systems, railroads, ice plants, bus and train stations, freight shipping facilities, grocery stores, coal distribution companies, lodging houses, and more.

One legacy of this approach is represented in the 2,000 municipally owned electric utilities, which, together with co-ops, supply more than 25 percent of the nation's electricity. Another is the longstanding and highly successful publicly-owned Bank of North Dakota, set up in 1919 (along with a state operated Mill and Elevator and a state insurance program) by the state's governing Non-Partisan League in response to the suffering of local farmers at the hands of out-of-state corporations.   

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