Gas Price Collusion?

[airdvr 200]

As I'm watching the gas prices pleasantly falling I'm struck by the absolute similarity in prices among the oil companies. Where is the price war? Why wouldn't one of them try and low-ball the others. You could capture the domestic market by selling for .20 per gallon less than the other guy. The free market looks like it's non-existent when it comes to oil.

Please don't dent the planet.

Destinations by Roxanne

[quade 3]

airdvr

You could capture the domestic market by selling for .20 per gallon less than the other guy.

Why don't you take a 5% pay cut? I'm sure it would make your boss happy.

quade -
The World's Most Boring Skydiver

[billvon 2,475]

Must be Obama's fault.

[rushmc 18]

billvon

Must be Obama's fault.

Now this is funny when remembering back that Bush was blamed when the price got above what, $2.00/gal

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[freethefly 6]

In the last week, I've driven from Louisiana, MO to Mt. Pleasant, TX. Gas prices have been near the same at all stations. They have been in the 2.79 to 2.99 range, with the exception of Phillip 66. They have remained above 3.00. I hope the price stays below 3.00. I'm heading to Dequincy, LA today to start a test on the Kansas City Southern RR on Monday. Being that my big GMC gets around 15 mpg, this is a relief.

"...And once you're gone, you can't come back
When you're out of the blue and into the black."
Neil Young

[Southern_Man 0]

Are you talking about prices at the pump or wholesale price per barrel?

"What if there were no hypothetical questions?"

[airdvr 200]

At the pump.

Please don't dent the planet.

Destinations by Roxanne

[weekender 0]

airdvr

As I'm watching the gas prices pleasantly falling I'm struck by the absolute similarity in prices among the oil companies. Where is the price war? Why wouldn't one of them try and low-ball the others. You could capture the domestic market by selling for .20 per gallon less than the other guy. The free market looks like it's non-existent when it comes to oil.

the oil companies dont own the local gas stations. thats a franchise branding thing. gas stations buy gas from gas refiners at the wholesale market. they then sell the gas as cheap as they can to get you to come into their little stores and hope you buy a Redbull or Slimjim at a nice mark up. Gas stations make very little money on gas and there is one on every corner. competition is very tough and i would guess there is no room for you .20 low ball offer. obviously they would do it if there was room.

Where i live gas stations are owned and run by recent immigrants. i really doubt they are getting rich ripping you off. if they where, you would see a lot more middle age white guys pumping gas.

"The point is, I'm weird, but I never felt weird."
John Frusciante

[Boogers 0]

airdvr

As I'm watching the gas prices pleasantly falling I'm struck by the absolute similarity in prices among the oil companies. Where is the price war? Why wouldn't one of them try and low-ball the others. You could capture the domestic market by selling for .20 per gallon less than the other guy. The free market looks like it's non-existent when it comes to oil.

I'm not seeing that where I live. Prices run from 2.78 to 3.02, sometimes only a block apart. And the 2.78 stations are chock full, while the 3.02 stations are ghost towns.

[FlyingRhenquest 1]

OPEC colludes to keep their part of the supply at a set price. For a long time they were terrified to let oil go over $60 a barrel and adjusted their production to keep the price point there. They were more-or-less the only game in town, and their thinking was that gas over $1 a gallon would drive Americans to smaller, more efficient cars and to other sources of energy.

With emerging markets in China and India, they couldn't keep the prices that low anymore even if they wanted to. In the USA, the problem is almost as much that refineries are keeping their stockpiles low, which is leading to increased volatility in the market. As prices have gone up, it's become profitable to develop US resources, even with the more stringent environmental regulations we have in this country. I think I remember hearing that we're producing as much as the larger OPEC countries now, but it's not having that much effect on the market. I believe we're also exporting some of that to other markets, which are willing to pay more for it.

The upshot of all that is prices are never going to go much farther down than they already are. I'd expect them to go up, perhaps significantly, in the next decade or so. Look for hybrids, electric cars and alternative fuel vehicles to start becoming more popular as that happens. I can also foresee a time, quite possibly in my lifetime, when most Americans will not be able to afford to own and operate a motor vehicle.

I'm trying to teach myself how to set things on fire with my mind. Hey... is it hot in here?

[sfzombie13 312]

while this may be true in theory, i have noticed a trend lately. it used to be (6 months ago) that i could watch oil prices and see what gas would be, but no longer. since i drive all over the state, i get to see the trends most don't see. there are little pockets of low prices that continually move around the state. it has no rhyme or reason i can see, and i am really good at detecting patterns. and since it all within one state, differences in taxes have nothing to do with it.

i know for a fact that when oil was over $110 a barrel, gas was around $3.25 a gallon next to my house. it is now well below that ($95 last i checked) and is still $3.25.

it is collusion for sure, how else can anyone explain a roving low price shared among all the different gas stations around an area, when sometimes just a block away, it goes up anywhere from 10 to 20 cents? not too many notice the fluctuations, and if they did, how could anyone prove anything?

_________________________________________
Si hoc legere scis nimium eruditionis habes

[skypuppy 1]

what surprised me last week was 3 mornings in a row I drove past a gas station selling at $1.22.9 or 1.23.9/LITRE, and the same three days at 3:30 or so, the station was priced at $1.15.9/LITRE.

That translates to about $4.69/gal in the am, and $4.22/gal in the afternoon. Obviously trying to stick it to the commuters, I guess.

If some old guy can do it then obviously it can't be very extreme. Otherwise he'd already be dead.
Bruce McConkey 'I thought we were gonna die, and I couldn't think of anyone

[weekender 0]

sfzombie13

while this may be true in theory, i have noticed a trend lately. it used to be (6 months ago) that i could watch oil prices and see what gas would be, but no longer. since i drive all over the state, i get to see the trends most don't see. there are little pockets of low prices that continually move around the state. it has no rhyme or reason i can see, and i am really good at detecting patterns. and since it all within one state, differences in taxes have nothing to do with it.

i know for a fact that when oil was over $110 a barrel, gas was around $3.25 a gallon next to my house. it is now well below that ($95 last i checked) and is still $3.25.

it is collusion for sure, how else can anyone explain a roving low price shared among all the different gas stations around an area, when sometimes just a block away, it goes up anywhere from 10 to 20 cents? not too many notice the fluctuations, and if they did, how could anyone prove anything?

my theory is not some far fetched academic idea. its basic supply and demand and how the industry works. they are small independent businesses that sell gas as cheap as possible to get you into the store for large mark ups on soda and beer.

it does not seem possible that a bunch of small business owners are getting together behind closed doors to fix the price of gas. firstly, gas is such a low margin business that there is no room to manipulate. i find it much more believable they are purposely colluding on the Redbull and Slimjims. they have a huge markup and there would be room. secondly, these are tiny business owners working 20 hour days to barely make a living. i cannot imagine they have the time to try to get all of the other owners together to agree on ripping you off for a penny.

"The point is, I'm weird, but I never felt weird."
John Frusciante

[NewGuy2005 51]

weekender

***As I'm watching the gas prices pleasantly falling I'm struck by the absolute similarity in prices among the oil companies. Where is the price war? Why wouldn't one of them try and low-ball the others. You could capture the domestic market by selling for .20 per gallon less than the other guy. The free market looks like it's non-existent when it comes to oil.

the oil companies dont own the local gas stations. thats a franchise branding thing. gas stations buy gas from gas refiners at the wholesale market. they then sell the gas as cheap as they can to get you to come into their little stores and hope you buy a Redbull or Slimjim at a nice mark up. Gas stations make very little money on gas and there is one on every corner. competition is very tough and i would guess there is no room for you .20 low ball offer. obviously they would do it if there was room.

Where i live gas stations are owned and run by recent immigrants. i really doubt they are getting rich ripping you off. if they where, you would see a lot more middle age white guys pumping gas.

What he said. Where I live, all gas stations of all brands buy their gas from the same supplier, who is not connected to any of the "major" oil companies.

[kallend 1,679]

airdvr

As I'm watching the gas prices pleasantly falling I'm struck by the absolute similarity in prices among the oil companies. Where is the price war? Why wouldn't one of them try and low-ball the others. You could capture the domestic market by selling for .20 per gallon less than the other guy. The free market looks like it's non-existent when it comes to oil.

They all have access to GasBuddy, just like you and I do.

...

The only sure way to survive a canopy collision is not to have one.

[sfzombie13 312]

you can think whatever you wish, it's a free country. but it is still a theory, period. like the flawed math in the theory of economics which went around not too long ago, hell they even got a nobel prize for the wrong shit! the only theories i know that work in practice, all the time, without interference from people, is in math. whenever you put people in charge of anything, it becomes corrupted. communism is an example, and the so-called free market theory of which you speak is another. both are good examples of men corrupting theories in practice.

as for the low margin of profit and too many owners to collude on prices of gas, who do you think owns the gas? while it may start with millions of gas stations, it ultimately boils down to very few actual owners. that's what franchises are all about. count up how many gas stations around you are not a major brand, like exxon or bp?

i am not a conspiracy theorist, but when i see things which don't make sense, i like to investigate and see what's behind it. most of the time it's nothing. could be coincidence. in this case, it's never going to be answered for me, unless some kind of collusion is going on and it gets publicized.

_________________________________________
Si hoc legere scis nimium eruditionis habes

[PhreeZone 15]

Coming from a family that ran a gas station for 40 years there is some info that might help on understanding this more. Markups on fuel are minimal, it was averaging less than .10 cents a gallon most time. Where the money is made is the food, drink, servicing and other items that they get you for at a gas station. This is one of the reasons that so many gas stations are associated with stores is that they leverage the buying power to get higher margins elsewhere and just use cheap/free gas to pull you in and make the money outside the pump.

Daily swings happen due to a few reasons, one was mentioned and its correct that it was a chance to make a few more cents if you were on the right side of the road to catch the morning/afternoon commuters so it is common to increase the price a few cents at the right time of day for that. If you were on the other side of the road you could leave prices low since to get people to fight traffic to get into/get out of your station was often times more trouble so they would skip it even if you were lower in price.

Other factors that were impacting the daily swing is that the wholesaler in the area would call and notify that their prices are going up or down and the rest of the stations that purchased from that same supplier would get the same notice so they could either absorb the impact in their margin or they could adjust prices to keep their margin. Usually the fuel in the tank is sold on partial credit so only have its all sold is the money transferred to the reseller. This partial credit also means that you are also trying to figure out the margin needed to pay for the next shipment and what its prices are going to be at.

In a given region there might only be 2-3 whole sellers but due to contractual requirements if you are a Phillips 66 you can only buy from X or if you are a Shell station you can only buy your fuel from Y supplier so that whole seller might have been able to get a commitment from a refinery when prices were on a downswing but if they gambled wrong they might have timed the market and bought their shipment at a peak for the day so the prices are higher. Quantity impacts price here also, smaller wholesalers are subject to more volatility in the market so that impacts their downstream customers but this is good since if they time it and buy at a low they have lower prices for a bit, time it wrong and prices spike. Same on demand, if demand is low the whole seller still needs to move the fuel so prices might drop and lose all margin just so they can get ready for the next shipment.

Refineries also adjust prices as they change the formulation for the fuel blend that they are using. Summer and Winter blends are different and have different cost basis due to the amount of energy and effort put into making and transporting each type of fuel to the whole sellers.

Yesterday is history
And tomorrow is a mystery

Parachutemanuals.com

[weekender 0]

sfzombie13

you can think whatever you wish, it's a free country. but it is still a theory, period. like the flawed math in the theory of economics which went around not too long ago, hell they even got a nobel prize for the wrong shit! the only theories i know that work in practice, all the time, without interference from people, is in math. whenever you put people in charge of anything, it becomes corrupted. communism is an example, and the so-called free market theory of which you speak is another. both are good examples of men corrupting theories in practice.

as for the low margin of profit and too many owners to collude on prices of gas, who do you think owns the gas? while it may start with millions of gas stations, it ultimately boils down to very few actual owners. that's what franchises are all about. count up how many gas stations around you are not a major brand, like exxon or bp?

i am not a conspiracy theorist, but when i see things which don't make sense, i like to investigate and see what's behind it. most of the time it's nothing. could be coincidence. in this case, it's never going to be answered for me, unless some kind of collusion is going on and it gets publicized.

my family owned a gas station. my theory is based in practice. the stations are not owned by oil companies. the prices are not set by oil prices but wholesale gas prices which come from the refiners. your theory goes against all rules of supply and demand and known practices of the industry. you believe whatever you want. i am not going to argue with someone who detects patterns. i cannot do that. i'm using common sense and known business practices in a very simple to understand market. nothing i said is even remotely controversial or radical.

"The point is, I'm weird, but I never felt weird."
John Frusciante

[skypuppy 1]

most people won't necessarily argue about a few more cents - but the swing I talked about was a 47 cent/gallon swing, not 10 or even 20. on a daily basis.

If some old guy can do it then obviously it can't be very extreme. Otherwise he'd already be dead.
Bruce McConkey 'I thought we were gonna die, and I couldn't think of anyone

[Southern_Man 0]

airdvr

At the pump.

I don't see this at all. We have robust competition in my town. One station in particular will aggressively lower their price about every two months. A lot (but not all) of the other stations will lower for competition.

Recently we have a new 7-11 open in town and they kept their prices very low for the first two weeks they were open to try to establish themselves in the market.

Sure, the swings tend not to be that high but as others have explained that is because all the stations buy from a limited number of suppliers and the mark-up tends to not be very high to begin with.

"What if there were no hypothetical questions?"

[masterblaster72 0]

billvon

Must be Obama's fault.

And all of the progressive liberals worshiping him like he's the messiah or something.

Be humble, ask questions, listen, learn, follow the golden rule, talk when necessary, and know when to shut the fuck up.

[kelpdiver 2]

PhreeZone

Usually the fuel in the tank is sold on partial credit so only have its all sold is the money transferred to the reseller. This partial credit also means that you are also trying to figure out the margin needed to pay for the next shipment and what its prices are going to be at.

Interesting detail to hear.

--

Going back to the big question of why doesn't someone try to corner the market? With what? Every gas refinery sells every gallon of gas they produce. Every oil producer has little trouble moving the crude. They don't have excess product to sell, so there's little reason to slash prices to gain market share. They can't gain market share.

We did see in 2008 that only a modest reduction in gas usage in America lead to a very substantial drop in oil (and therefore gas) prices. I believe it was 8% due to people driving less or driving less aggressively. We could achieve that and much more by adopting the more aggressive fuel economy standards. And for a least a while, that would help considerably. On the downside, it appears that the developing world is eager to take up the slack in demand.

[sfzombie13 312]

you specifically said the theory of supply and demand. this is just that, a theory. one that holds up pretty well most places, but not all the time. while what you say may be true about one place and you are using this knowledge to formulate theories (which i do a lot, good to be able to do), that is not always true about another place with different circumstances.

and there may not be anything to it at all. but people who say that the price of oil does not drive the price of gas is nuts! maybe not today or in real time, but it definitely does. i know what i can observe, and that was that in the past, i could see how much a barrel of oil cost and relate that to gas. i could tell if it was going to go up or down within a day or two. maybe i was extremely lucky, i don't know. doesn't really matter, just a thought.

_________________________________________
Si hoc legere scis nimium eruditionis habes

[Andy9o8 0]

You're only now realizing that the breakup of Standard Oil was in name only? LOL.

Here's your link!

[billvon 2,475]

>Now this is funny

You can't keep your policy. Benghazi.