Sweet Zombie Jesus: If you have one gas station selling gas at 2.50 and one selling at 3.00, now both will sell at 2.75. Screw half the people so you look good. Then when their prices go up, just blame "big oil" again.

No, both stations will now be selling at $3 (and the gas companies will blame the state of Conneticut)

Tom_Slick: And isn't it possible the price a station pays may have something to do with Credit rating, product loss, and location.

It's fairly well established that the oil companies are using this sort of pricing to take advantage of volume of potential sales.

Why else is the gas by the I-5 in town where I live at least $.20 higher than the gas on that station near the back streets? It's a hell of a lot easier to get to the station by the '5...

pchef: All you need to do is become one of the shareholders of XOM. It's a farking corporation!

STFU, troll. Not everyone's a rich bastard with a silver spoon in their mouth.

We will rationalize the market once and for all!

munisfire-- "...the natural state of Capitalism tends towards monopolies"

First off, a "state" of something is not a trend. State refers to current situation, ie static position. The discover of a trend requires analysis of multiple points in time, multiple states. Connected dots.

Moreover, capitalism in a free market does not tend toward monopolies. Individual companies certainly wish to avoid or eliminate competition, but a working legal system permits new entries to industry, and thus increased profitability encourages competition. And natural barriers to entry might exist, especially in a capital-intensive industry such as the oil business. But government regulation and intervention just raises barriers further.

Established firms may encourage regulation to discourage new competitors-- eg the meat packing industry in the time of Sinclair Lewis. But in the end, legislators do the dirty work.

The Connecticut law decreases competition, as government intervention often does. Bad thing, not good thing.

You hit the nail on the head there, Sweet Zombie Jesus. I would like to add that under zone pricing, the lower prices are found in the lower-income areas and the higher prices are in the more affluent areas. All this will do is raise the price of gas for those who can afford it the least.

/Buffy will save money every time she drives the H2.

ok - some have mentioned this - but here's the breakdown, 2006 numbers to date (USEIA) to what we're paying per gallon of gas:
43% - Crude import price
31% - Fed & state taxes (avg. of state)
13% - Refining Costs & Profit (Big oil's take)
13% - Distribution and Marketing (smaller tank farms, truckers, jobbers, etc.)

/could use the cliche "I work for and am getting a kick" response, but I actually do work for a mid-sized wholesaler in the Northeast
//big oil is making a lot of money but nothing compared t the gov't and to the crude suppliers
///oh - and the U.S.'s biggest supplier of crude? Canada - so blame them (pun intended)

Who says competition doesn't exist in the US market? It's one of the most hypercompetitive markets we have. A gallon of gas costs less than a gallon of milk. Adjusted for inflation, the price of a gallon of gas, even with the higher taxes levied on it these days, is still lower than during the 1970s oil crises and about on par with prices in the 1950s.

In fact, the price of gas over the past 25 years has risen at about the same rate as a price of a gallon of milk.

Perspective, anyone?

muninsfire: When the 'market' that sets the price is composed of a group of people who collude to fix prices, things get a bit out of hand, and the price changes to "what can we make them pay?".

There have been all sorts of investigations into "Big Oil" colluding, and nobody has come up with anything. The fact is, they are too greedy to fix prices, one of them will always cut prices to sell more gas.

Please explain why when the price of a barrel of oil goes up a dollar the price of gas goes up 3 cents. When the price of oil goes down a dollar the price of gas stays the same.

By the way, let me speak as someone who does have a little first hand experience how business operates. A regulation as retarded as this will be circumvented thirty different legal ways and a couple more illegal but impossible to prove ways.

So we are forced by regulations to charge you the same price for gas that we charge everyone else although it's more expensive to get it to you and our financial models suggest that's a bad idea?

Guess what?

Somewhere we so happen to have a wholly owned Cayman corporation (Special Purpose Entity) subsidiary that so happens to have a deal with a Cayman corporation of yours, your Cayman corporation is going to enter some complicated derivative trades with ours, and it so happens they are all going to go south.

Go south by the exact amount that we would have charged you extra in the first place.

Regulation effectively meaningless... except... that by putting some retarded red tape in the way of the simple negotiated transaction that was going on in the first place, the economy just lost a shiat load of money to lawyer fees and transaction costs to set up and funnel money around all these entities and have people to keep track of it all.

Plus your economy is less transparent and stockholders now have even less oversight over their assets because nobody can of course disclose any of those relationships (at least not in a way that approached being understandable).

/All this stuff sounds good in theory (low prices, stick it to big business - YAY!, but spend a couple hours listening in any boardroom and you'll realize you're completely fooling yourself.

majindan
Yes, do something even if it's wrong. Just do SOMETHING!

/sad

pchef

Circumstantial evidence of collusion(Cheney closed-door meetings) and a questionable foreign policy since then imply that boardrooms can have an effect on the market.

Do you not see what is happening?

rogersnowden: but a working legal system permits new entries to industry,

Then you don't have a purely capitalistic system--you have a legislated capitalistic system. Without your idealized "legal system" the corporations will buy, merge, drive out, or otherwise remove competition in any way they can--because the ideal state for a corporation is a monopoly.

MisManager: In fact, the price of gas over the past 25 years has risen at about the same rate as a price of a gallon of milk.

Gas is about equal to milk here, and is rising faster.

ManRay: There have been all sorts of investigations into "Big Oil" colluding, and nobody has come up with anything. The fact is, they are too greedy to fix prices, one of them will always cut prices to sell more gas.

And who ran the investigations? Cite your sources.

MisManager

Perspective? How about this:

How much has the price of gas changed since 2002?

muninsfire:

Why else is the gas by the I-5 in town where I live at least $.20 higher than the gas on that station near the back streets? It's a hell of a lot easier to get to the station by the '5...


I may cost more to deliver the gas to the station near I-5. So they should eat that cost. They may have to deliver only at night maybe they have to pay the delivery driver time and half to make that delivery. Besides time and time again Americans have proven they will pay more for convienence. If no one bought gas at the more expensive stations they wouldn't charge more.

Interesting. I wonder if this new regulation will facilitate collusion and price-fixing?

SVenus: Not surprisingly, fuel from corn isn't a great bargain.


nope - especially when compared to ethanol made form sugar cane - people are trying to use them as apples to apples (with the U.S. and Brazil also being compared) but the BTU generation from sugar cane is through the roof compared to corn

also - to get enough corn to produce the ethanol needed to get off any crude oil usage -- you'd need to produce enough corn in a land acreage 2.5 times the size of Texas - and do it yearly -- good luck with that

//the answer is in alternative biomass additives, at least for heating, but it's going to take a looong time, not an overnight solution

Higher gas prices* are the result of higher oil prices which are the result of COMMODITY TRADING ON THE WORLD MARKET, not Exxon or Shell jacking up prices.

Evil oil corporations are owned by shareholders, which is probably you, if you have money invested in a 401(k) or other diversified mutual funds.

*Could also be from a local station owner independently raising prices

I tried reading all the above posts but it got to be too much of a flamewar to bother following, so forgive me if I'm repeating something someone else already stated...

I realize oil companies are "absolute evil," but putting that aside for a moment, has anyone considered the possibility that the oil companies are attempting to help the little guys with this practice?

Think about it for a moment. If gas was the same price everywhere, people would typically gas up at the most convenient place -- near the freeways. Very soon the corner stations would go out of business. I think we can all agree that having more stations spread out a bit is a good thing, and if you don't then think about it again when you're on Empty and looking for a place to get gas.

So now the government is prohibiting the oil companies from helping out the little Ma & Pa store off the beaten path. How nice for everyone!

Chances are both stations are getting 10,000 gallon deliveries. A local gas station owner awhile back metioned that 10,000 gallons is his minimum purchase.

Tom_Slick: I may cost more to deliver the gas to the station near I-5. So they should eat that cost. They may have to deliver only at night maybe they have to pay the delivery driver time and half to make that delivery. Besides time and time again Americans have proven they will pay more for convienence. If no one bought gas at the more expensive stations they wouldn't charge more.

No, it doesn't cost more to deliver there, and I have witnessed deliveries taking place during the daytime. The gas trucks come down the I-5, and deliver to the stations there, then go to the other stations.

The convenience aspect is *precisely* what we're talking about. The company providing the gas knows that they can get away with charging that station $.20 more per gallon. That station makes about the same profit per gallon as the back-street station, but the supplier makes a significant amount more per gallon selling to them.

wheatpennyandaglock

Please explain why when the price of a barrel of oil goes up a dollar the price of gas goes up 3 cents. When the price of oil goes down a dollar the price of gas stays the same.

Well for one thing, raw sweet crude in El Paso or wherever is not what you put in your gas tank, and even if you did could presumably a couple more transactions and business decisions (inventory management, negotiated prices, transportation costs) have to happen between here and there that aren't necessarily as simple as 'price of raw material down - price of finished product delivered retail down same amount'

Erm wouldn't 10,000 gallons exceed the gross weight a tanker could carry. Isn't there some law about not exceeding 40,000 pounds for tankers. Been along time since I stole a fuel truck but 10,000 gallons would be about 78,000 pounds I reckon.

Hell charging different prices must be ok as there trying to pass laws against it. That gross weight thing is a big no no. Some lucky cop stopping that guy could proably put an addition on his house with that kinda tip.

Seeing how well our legislators have done with the energy policy passed last year (find it and read it). I'd say it's about time to get the government out of the way.

High gas prices are a result of the environment Oil companies operate in. Crooked or not, I don't think legislation of gas prices will have a positive long term effect. Seems to me if we need legislators working on something it should be getting are arses out the mess they have put us in the Mid-East, which has had the most negative effect on oil prices.

While prices are high people start to think about other sources, methods of transport, etc. Keeping it low buy subsidizing various components of the industry (auto, drilling, transportation etc.) helps only a disproportionate part of the population,

Additionally, the government is collecting a percentage of the total as tax that goes into the general fund, and right now (before the congresstional election) they really would not want to start cutting income for various programs that depend on this money (the higher the gas price the more money collected, the more funding, you do the math)

We are in this situation because our government put us here. If they want to do something, mandate government cars get 85mph, that they start taking the bus, trains etc. Stop passing foolish energy bills and have new cars tested and the MPG realistically labeled; mandate that new cards get high mpg, (what are they afraid of, that US car makers will have to lay of workers?)

But please, Congress don't do anything more, stay out of it, let the prices go where they may and let new tech enter the market.

Let's have US demand Capitalism, not Chinese command Capitalism,

captainover: Higher gas prices* are the result of higher oil prices which are the result of COMMODITY TRADING ON THE WORLD MARKET, not Exxon or Shell jacking up prices.

Evil oil corporations are owned by shareholders, which is probably you, if you have money invested in a 401(k) or other diversified mutual funds.

Not to sound tinfoil-hatted, but you *do* realize that all the oil companies agree to what these "commodity" prices are to be, and manipulate the available amount of oil on the market to get the prices they want?

And the purpose of a corporation is to make money--and the most effective way for them to make money is to be a monopoly.

I truly believe high gas prices are good for our country in the long run. In fact, the higher the better.

I'm not WalkingCarpet, but I feel sorta the same way

1. Gas comes from oil
2. Oil is a limited resource at any given price point
3. As oil prices increase, people will be driven to conserve and find alternatives, stretching the supply
4. Eventually dinoil will be relegated to special purposes, probably eliminating one of the biggest sources of pollution in developed areas(car exhaust).

The slower the increase(though it's still going to have to beat inflation), the less overall effect on our economy. As an earlier article showed, mopeds are now gaining popularity in the states. It's rather trivial to make a short-ranged completely electric moped, you don't need to have a fancy charging system installed in your home for thousands of dollars, etc...

Plus, at 9 cents/kwh, $1 electricity is roughly equivalent to a gallon of gas. Hmmm...

30mpg car at $3/gal, $93/1000 miles
100mpg moped at $1/gal (all equivalents) $10/1000 miles

Savings: $80 per 1k miles. Assume 3k/year, $240, five years, $1.2k saved in fuel costs alone... You'll probably be able to get a cut on your insurance as well. Best if you need an extra vehicle anyways.

Hmm... Not worth it to me, yet, but tempting.

And who ran the investigations? Cite your sources.

Every time gas prices get a little high, the Feds pander to the shrieking public that wants them to do something. So a commission is formed to look into unfair business practices like collusion, fraud or gouging. Every time, they have come up with nothing.

After you tell me that the government can't be trusted to investigate such matters because they are influenced by BigOil, I'll ask how they can be trusted to "solve" the problem as it is now with more regulation.

willabr: We are in this situation because our government put us here. If they want to do something, mandate government cars get 85mph, that they start taking the bus, trains etc. Stop passing foolish energy bills and have new cars tested and the MPG realistically labeled; mandate that new cards get high mpg, (what are they afraid of, that US car makers will have to lay of workers?)

Rather than forbidding import of efficient cars from other parts of the world that already use them?

/I want a SmartCar. They look nifty, get good mileage, and are ideal for my personal situation.

Dancin_In_Anson Government control of private business...elimintaion of the free market...wow...that sounds just like...

Occams_Electric_Razor Putting the welfare of our country and our economy in the hands of multi-national corporations that don't have any patriotic obligation to it will not help us in the long run.

Until recently I worked for the world's second largest oil company. My job afforded me access to senior management. For the most part they are smart, nice, hard-working people that have worked there way up the company ladder. I do not believe they are part of some conspiracy. That being said, they have very little interest other than for PR purposes to explore new technologies or lower prices. Their money is invested in petroleum and they are making record profits.

The problem is not that oil companies make a lot of money or that one stations gas is more expensive. The problem is that we are dependent on the energy they give us. I also have a real problem with these companies taking our natural resources and selling them on the global market to the highest bidder. If we had a surplus that would be fine, but every drop of oil that is drilled domestically should be refined and distributed in the US. I think that we should form an alliance with Mexico and Canada much like OPEC and quit buying oil from countries that use it against us.

I would be willing to pay the current cost of gas if I knew that the money was not going to the Middle East. I would also like to see an incentive program much like Paul Allen's private space race for alternative fuel and cleaner, more efficient cars, factories and appliances.

Then we can work on bringing our factories from China back to North America. If we would open these in Mexico it could help their economy and would relieve some of the US immigration problems. We could use American technology to emit less pollution at these factories than we see in China. We would also waste far less than we currently do shipping the goods across the Pacific.

/ Just a couple of ideas.

muninsfire: but the supplier makes a significant amount more per gallon selling to them.


Why shouldn't they make more if they can?

My company makes more selling to direct to consumers rather than selling through a reseller. Our retail price is the same. So buy your logic we should give our product to the reseller, since we make more selling direct to the consumer.

Over_Zealously_Apathetic
And how much did the price of gas rise in the previous 25 years? Answer: almost none. Adjusting for inflation, and taking gas taxes into account, the price of a gallon of gas has FALLEN by 50% from 1981 to 2002.

What we are seeing is that the price of gas is more subject to external shocks than is the price of milk. Of course, we already knew this, at least those of us old enough to remember the 1970s.

ManRay: I'll ask how they can be trusted to "solve" the problem as it is now with more regulation.

They can't. Obviously. Your point?

Absence of evidence, in this case, is not evidence of absence.

Dancin_in_Anson

Government control of private business...elimintaion of the free market...wow...that sounds just like...


In a traditional, and healthy, free market government intervention would be unneccessary since rising prices would shrink demand whilst other competitors would either change their models or new competitors would enter the field and undercut the overcharging companies (thus stealing customers and bringing supply and demand back into balance). This is what makes your assertion about free markets viable and it is the reason why we should be cautious about government intervention (since it has the potential to skew supply and demand to the point where everyone spends more while innovation is strangled).

However, the energy industry is not the type of market where this is a viable or even reasonable strategy. It has incredibly high barriers to entry (capital intensive production and distribution systems) & a highly inelastic demand curve (no matter how high the price rises we still need their product for energy).

The government should control and monitor such industries simply because the means to pillage the populace are readily available in such industries.

Guveyan said in an interview. "When it's 70 bucks a barrel, we're the ones paying the 70 bucks."

This idiotic observation kills me everytime a corporate bozo makes it. I want to say "yes, and you pass it right along to the consumer."

the only thing that will hurt Mr. 70 bucks a barrel's bottom line would be competition--which would force them to lower their prices, increase supply, and slim down.

DaSwankOne
I hereby award you the [REASONABLE] tag.

Tom_Slick: Why shouldn't they make more if they can?

Apparently, the state of Conneticut thinks otherwise.

And yes, if you went to the refinery and filled up there, they could make even more money.

However, it's more convenient for the gas companies [ and your company, likely ] to sell large quantities to distributors, and let the distributor [ gas station, retail store ] take care of the inherently messy business of customer service.

2006-04-26 10:14:13 AM swankywanky
uppliers
///oh - and the U.S.'s biggest supplier of crude? Canada - so blame them (pun intended)

You think we're getting gas for cheap??!?!

Try CAD$1.10 / liter
aka US$0.98 / liter
aka US$3.71 / US Gallon

How about the US refineries not keeping up with the demand by creating an artifical undersupply that drives prices up... and failing to protect the gulf coast refineries from hurricanes.

Blame --- Right back at ya.

Stavr0: How about the US refineries not keeping up with the demand by creating an artifical undersupply that drives prices up... and failing to protect the gulf coast refineries from hurricanes.

Failing to protect the refineries? Was there a refinery accident associated with the recent hurricanes?

Dancin_In_Anson: Why not let the government control the who what where when why and how much in all aspects of the economy!

That's called Communism, and it's illeg...er, sorry, kiting's illegal.

The problem is that when the government and corporations begin mixing, corruption ensues.

Y'know....it'd be nice if lawmakers were forbidden [ and it was enforced ] from receiving any benefit at all from a corporation? And if there were some incentive for higher taxes on corporate profits?

muninsfire

Not to sound tinfoil-hatted, but you *do* realize that all the oil companies agree to what these "commodity" prices are to be, and manipulate the available amount of oil on the market to get the prices they want?

And the purpose of a corporation is to make money--and the most effective way for them to make money is to be a monopoly.

What you are talking about is a pricing cartel, and aside from a million and one practical reasons why that would be impossible for downstream oil companies to even hope to hide. The natural resources market being one of the most studied and investigated data sets in the world, there are legions of brilliant economists, mathematicians, political analysts, finance academics, and business guys slicing the data up every possible way looking for any possible clue about what might move prices. Something as huge as a distortion caused by simple price fixing would be apparent on thousands of smart (and unaligned) people's radar screens in five seconds.

It's also simply the case that cartels basically never work for one reason. If everyone agrees to sell oil at $100 if I start selling it at $99 (still a high price) suddenly I can sell way more than everyone else and still get a hefty margin - resulting in huge profits for me. When the other cartel members see this, they don't like it of course and turn around and lower their prices in turn, and so on, until the price falls exactly as far as it can (to what would have been the market price anyway). The incentive for any one member to cheat on the fixed price at any one time is simply too huge.

The most effective cartel in the world is probably OPEC and that KINDA SORTA works sometimes because the participants are primarily nations with mutual political interests and constiuencies (and can meet and openly try to enforce cooperation), rather than various public multinational companies headquartered in different countries (that would have to keep it an ABSOLUTE secret and have no way of enforcing agreements).

Even with those advantages OPEC, by the way, doesn't really work either, as there is a huge amount of cheating on its agreements. Consequently OPEC has a certain amount of meetings agreeing to production targets, but even more meetings where they simply try to get their members to stop selling twice as much as they were supposed to under the old targets.

That's the most effective cartel in the world, and it still doesn't work. That all the oil companies are doing the same with far far less means at their disposal and in absolute secrecy is completely preposterous.

MisManager: Failing to protect the refineries? Was there a refinery accident associated with the recent hurricanes?

Several were damaged, IIRC.

BlindMan: That's the most effective cartel in the world, and it still doesn't work. That all the oil companies are doing the same with far far less means at their disposal and in absolute secrecy is completely preposterous.

You've made a good case for OPEC. How, though, would you explain the oddity in the gas prices?

BlindMan By the way, let me speak as someone who does have a little first hand experience how business operates....Somewhere we so happen to have a wholly owned Cayman corporation (Special Purpose Entity) subsidiary that so happens to have a deal with a Cayman corporation of yours, your Cayman corporation is going to enter some complicated derivative trades with ours, and it so happens they are all going to go south.

Thank you for pointing out how crooked the average person who has "a little first hand experience how business operates" will be in order to get around paying taxes or following the law. I am glad to see that profit at any cost is alive and well.

Damaged? Everything was damaged. There was this system of levees that failed. Was there a spill? No. I actually think the refinery companies did an amazing engineering job to prevent such a thing. Same goes for the rigs and pipelines in the gulf, which held up amazingly well.