Are they saying it's our fault?

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For the last 15 years, his work as a professional economist has largely focused on energy markets. He has served as an expert on matters involving petroleum pricing, natural gas trading, and antitrust claims regarding market manipulation. He has published articles on various aspects of energy markets, and has spoken at numerous conferences.

He has consulted to governments and government regulators (including the Federal Energy Regulatory Commission ("FERC") staff, Mexico's energy regulator, the government of Singapore, the state of Victoria in Australia, Argentina's energy regulator, and New Zealand's Treasury Department, among others), non-governmental organizations ("NGOs") such as the World Bank and the Asian Development Bank, as well as numerous private companies all over the world. There is much, much more to his CV, too much to reproduce here.

Gollop for the consumer

Plaintiffs hired Mr. Gollop as an expert witness on their behalf. He concluded, and reported in a March 2009 affidavit, that on average, 62 percent of the price difference between Vineyard gasoline prices and prices on the Cape is not accounted for or justified by higher business costs for the Vineyard retailers. The data analyzed by Mr. Gollop comes from state and federal sources that keep track of local and regional gasoline prices as well as cost of living data, and from documents submitted by defendants during discovery in preparation for trial. Mr. Gollop's conclusions were the subject of a news report in the July 9 edition of The Times, entitled "Gasoline price analysis finds super premium price paid for regular gas at some Vineyard pumps."

The average unjustified premium, according to Mr. Gollop, was between 27 and 38 cents a gallon, or about 12 percent of the cost of a gallon of gasoline priced to the consumer at $2.77.

Consumer complaints about the high cost of gasoline on the Vineyard have been common and frequent for decades. Motorists complain that perhaps a margin of some sort is justified by the cost of transportation to the Island for gasoline and other fuels, but that the actual margin, comparing Island fuel prices to prices off-Island but nearby, is extraordinarily high. Mr. Gollop's data define the margin over the period he studied on behalf of the plaintiffs in the 2007 lawsuit, which is now before the federal district court for Massachusetts.

But, defense says, Gollop analysis "flawed"

Mr. Quinn rejects the Gollop findings on several grounds, calling it "flawed." He argues that the Vineyard market includes, in addition to four Vineyard gas stations named as defendants in the lawsuit, five gasoline retailers who are not defendants. He says all nine stations are players in the Vineyard retail gasoline market, and in some cases the non-defendant stations are close enough to the defendant stations to offer customers a choice of which retailer to patronize.

He points in particular to the two Oak Bluffs defendant retailers, which are closer to the two defendant retailers in Vineyard Haven and might have been rewarded by Vineyard customers who object to prices asked at the defendant stations.

In addition, he points out, Up-Island Automotive in West Tisbury, which often offers the lowest prices for regular gasoline among all nine gasoline retailers, is less than five miles from the Vineyard Haven gasoline stations that are defendants in the suit.

Mr. Quinn also disputes the validity of the comparison made by Mr. Gollop between prices at the four defendant gasoline retailers and three Cape Cod gasoline stations. He argues that the Cape Cod market is much larger than the three stations Mr. Gollop uses for comparison and that pricing is far more varied across the Cape and within local markets on the Cape than appears to be the case using only the data Mr. Gollop analyzes.

Brief history of the lawsuit

In early August 2007, a pair of experienced trial lawyers, one of whom is a seasonal Edgartown resident, filed a class-action lawsuit in Dukes County Superior Court against two gas wholesalers and three retailers. In their 27-page complaint, Michael Roitman and Stephen Schultz, lawyers with the Boston firm of Engel & Schultz, said that the defendants unfairly fixed the price of gasoline, gouged consumers who purchased gasoline, and engaged in unfair price gouging in 2005 after hurricanes Katrina and Rita.

The defendants in the case are R.M. Packer Company, Drake Petroleum Company, Depot Corner gas station, and Francis J. Paciello, owner of Edgartown Mobil and Depot Corner. The four gas stations whose data was analyzed by Mr. Gollop are Tisbury Extra Mart, owned by Drake Petroleum; Tisbury Shell, owned by the Packer Company; and Depot Corner Service Station and Edgartown Mobil, both owned by Mr. Paciello or by Mr. Paciello and his wife. Three gasoline retailers on Cape Cod were used by Mr. Gollop for comparison, one in Falmouth, one in Hyannis, and one in Provincetown.

There are nine gasoline dealers on the Vineyard. DeBettencourt Mobil and Jim's Fuel Station, both in Oak Bluffs; Airport Fuel Services in Edgartown; Up-Island Automotive in West Tisbury; and Menemsha Texaco in Chilmark are not defendants in the lawsuit.

The plaintiffs are William White of Oak Bluffs, a former business partner in Tisbury Fuel Services; R. Carleen Cordwell of Oak Bluffs; Ken Bailey of West Tisbury; Nadine Monaco of Oak Bluffs; Karen Lodge of Edgartown; Joan Kriegstein of Oak Bluffs; and Hilary S. Schultz of Edgartown, wife of Mr. Schultz

The defendants have moved for summary judgment in the case, and in a hearing before retired federal Judge Rya Zoebel, the plaintiffs opposed the motion. For the purposes of the argument over the motion for summary, the defendants have assumed that Mr. Gollop's data, but not his conclusions, are accurate, according to an attorney for one of the defendants. That's because, the defendants argue, even if one accepts all the plaintiff's testimony at face value, their case still fails to support the claims they've made, another attorney for the defendants explains.

There have been no court judgments on the merits of the plaintiff's claims of price fixing and gouging by the gasoline retailers, and Mr. Gollop's affidavit, setting out the data he used in his analysis of prices and his conclusions based on that data, does not extend to explicit confirmation of any of the charges, though he says his analysis finds the pricing activities of the defendants are in some cases consistent with cooperative pricing and amount to a "prima facie" case for price gouging.

No conspiracy

Mr. Quinn reports no reason to believe the four defendant stations, or some of them, conspired to fix prices higher than competition would dictate.

"Evidence presented through deposition testimony shows station owners' pricing decisions to be based on observations of prices charged by their competitors," Mr. Quinn writes. He reproduces questions and responses from Michael Wallace, proprietor of Jim's Fuel Station in Oak Bluffs, who describes his market research as extending only to driving around the Island, or having an employee drive around or telephone competitive retailers, to note the prices others were charging.

"Based on my review of the testimony," Mr. Quinn concludes, "there appears to be no evidence that the defendants, or any sub-group of defendants, conspired with each other to fix retail gasoline prices."

Ralph M. Packer Jr., owner of Tisbury Shell, said in a deposition that his pricing decisions were "based on a target, in order to maintain a constant difference between the station's retail price and its costs."

And, consumers don't buy on price

Mr. Quinn, reproducing in his report deposition testimony from one of the plaintiffs in the suit, finds that price differences do not appear to motivate Vineyard customers. "...Efforts to increase sales via lower prices have been unsuccessful," Mr. Quinn writes. "The operator of Jim's Fuel Service, Michael Wallace, stated that his gasoline sales would not noticeably increase if he were to lower his prices, and even noted that he once tried lowering prices by 20 cents per gallon with minimal success. His testimony that lowering prices does not attract customers suggests that purchasers of retail gasoline on Martha's Vineyard are apparently insensitive to price changes of that magnitude, i.e., a low price elasticity of demand.

"The low price elasticity of demand faced by gasoline stations on Martha's Vineyard is confirmed through testimony by the lead plaintiffs. As I noted above -and as discussed extensively in the economics literature - consumers base their gasoline purchase decisions on several factors, including price, brand, convenience (e.g., location), and full-serve v. self-serve, among others.

"Although plaintiffs allege that they 'paid artificially in-flated prices for gasoline,' they state a general lack of interest in making the effort to search for lower cost gasoline. Several lead plaintiffs testified that price is not a key determinant in their decision to purchase gasoline. Convenience appears to be the primary factor."

Mr. Quinn reproduces an exchange from the depositions of plaintiff Joan B. Kriegstein, as follows:

• Q. On the Vineyard, do you ever shop around for a better price?

• A. No.

• Q. Is price ever a factor where you buy gas on the Vineyard?

• A. No.

Of Nadine Monaco, as follows:

• Q. When you're making decisions about where to purchase gas, what factors do you consider?

• A. Not going out of my way to work.

• Q. So convenience. Is that the number one factor?

• A. For me it is."

Of Henry Kriegstein, as follows:

• Q. Are there any other factors or is convenience the only factor that you consider?

• A. Really just convenience.

• Q. So is it fair to say you don't shop around for the best price?

• A. That's correct.

And, of Carleen Cordwell, as follows:

• Q. The car wash and the convenience factor, and when you're purchasing fuel, no matter where it is, it's really just a matter of convenience whatever is closest by when you need the fuel? Is that a fair statement?

• A. Fair - I guess it's fair.

The defendant's expert concludes, "The above deposition testimony suggests that even if gasoline stations (other defendant or non-defendant) charged lower retail prices, plaintiffs would not change their purchase practices, corroborating the testimony of Michael Wallace, the operator of Jim's Fuel Station. The testimony is further supported by the actual prices observed at nearby gasoline stations on Martha's Vineyard. During the relevant time period, Up-Island Automotive had lower prices than many of the other stations for long periods of time and it is closer to Tisbury Shell or XtraMart Citgo than Edgartown Mobil or Depot Corner are to those two stations. Plaintiffs could have changed their purchases from Tisbury Shell or XtraMart Citgo to Up-Island Automotive but made no effort to do so on a regular basis. Furthermore, the fact that Up-Island Automotive's prices were lower than several other stations for noticeable periods of time provides more evidence that the sale of retail gasoline is not a perfectly price competitive market."

The Vineyard market, as defined by the behavior of consumers in the market, is one of "equilibrium," not intensive competitive pressure, which might be expected to yield lower prices. If lowering prices does nothing to increase retailer profits and may shrink profits instead, why should retailers do it?

"Basic economics dictates that reducing prices on a product whose demand is price inelastic - as supported by plaintiffs' testimony - would decrease profits for the supplier (i.e., the gasoline station in this case). In other words, the reduced margin to the station of lowering price is not offset by the increase in gasoline purchased by consumers, so there is no incentive to reduce prices if price is not an important factor to consumers. Thus, the prices set by gasoline stations (defendants and non-defendants) represent a competitive equilibrium condition that reflects the interaction of both supply and demand factors on Martha's Vineyard as well as individual profit-maximizing choices of the gasoline station operators."

Price gouging

As to the plaintiffs' charge of price gouging, during the 2005 emergency period following Hurricane Katrina in September of that year, Mr. Quinn's analysis, based on a broader review of pricing in the Cape and Island area than Mr. Gollop used, finds no basis for the allegation.

Mr. Quinn reports that in September of 2005, right after the Katrina hurricane, in what the state and federal government regard as an "emergency period" to be examined for evidence of price gouging, prices rose sharply, but not sharply enough to meet the gouging standard.

Prices among the defendant gasoline retailers on the Vineyard rose 16.25 percent, on average, during the month. Among the non-defendant gasoline retailers on the Vineyard, the increase averaged 16.38 percent. And, among gasoline retailers in Barnstable County (Cape Cod), including the three stations used by Mr. Gollop in his analysis for the plaintiffs, but not restricted to those three stations, the price jump was on average 20.22 percent.