Ga$oline

[schplurg]

Last week I paid $1.65 for regular.
This week $2.20.

I don't have a problem with paying more for gas, I really don't. We have it good in the USA. But I want to KNOW that I'm not paying more simply because a group of oil companies get together and decide that there's a "shortage" or that they just need more cash. I can buy the idea of raising prices as a holiday weekend approaches. Are they saving up for future campaign contributions?

Do they wake up one day and suddenly discover that the available crude oil has suddenly lessened by 35% and adjust prices accordingly?

My friend owns a gas station, but he isn't available right now for me to question. I figured there would be some people here at JREF with some insights (definitely opinions). I've actually discussed this many times before, but I'm ready for another round.

I realize that world events affect the availability and pricing. I guess my question is: what else is going on that can affect prices in such a dramatic way, and is it legit or a crock? Are we being gouged?

I don't have a hypothesis or a solution. I just think that a virtually overnight increase of 35% smells extremely fishy. The oil market seems much too extensive to warrant such a quick change.

Secondary question:
Why do the petrol stations insists on using the 9/10 of a cent on their prices? As in "$1.99 9/10 per gallon". That's got to be an American thing. I'm curious as to how that became common practice. I'm thinking about the electronic pumps now and wondering if it's being phased out. I can't afford to go to the station right now and look :)

I hope this comes across as more than just a rant. I'd really like to learn more about this issue, or at least hear some opinions.

[The Central Scrutinizer]

Let's get one thing out of the way up front - there is no conspiracy among big oil to overcharge for gas. It's supply and demand.

Now, as to the 2nd part of the question, how does the oil business work, I really don't have any insight on that.

[Tony]

Besides, doesnt OPEC have more control over oil prices than the oil companies?

[toddjh]

Originally posted by schplurg
Secondary question:
Why do the petrol stations insists on using the 9/10 of a cent on their prices? As in "$1.99 9/10 per gallon". That's got to be an American thing. I'm curious as to how that became common practice. I'm thinking about the electronic pumps now and wondering if it's being phased out. I can't afford to go to the station right now and look :)

I'm sure it's the same reason things cost $19.95 instead of $20. They get to charge you an extra 9/10th of a cent per gallon without the price looking higher to most people's first glance.

Jeremy

[Ed]

Originally posted by The Central Scrutinizer
Let's get one thing out of the way up front - there is no conspiracy among big oil to overcharge for gas. It's supply and demand.

Now, as to the 2nd part of the question, how does the oil business work, I really don't have any insight on that.

If you don't know the second part, you cannot address the first.

For all outlets to be within pennies in a short time period is certainly collusion.

[Cain]

In market economies prices function as indicators. Right now they're indicating that we need to invade Iran.

One post on the USENET claims the following:

The 9/10 cents was instituted by Standard Oil's J.D. Rockefeller years
ago as a royalty and a funding source for a group of men from all
resellers of gasoline that would strategically meet, insure and
evaluate the price of gasoline such that a monopoly could not be
proven. Here in Grand Junction Colorado it is clear that this plan
has and continues to work perfectly.

The 9/10 penny probably persists because the innumerate public rounds is inclined to round prices down 1.34 9/10 becomes 1.34 rather than 1.35. You see this all the time at stores: televisions for 199, crakcers for 2.99, cereal for 4.99 and so on.

[RCNelson]

schplurg:
Last week I paid $1.65 for regular.
This week $2.20. Here's why:
California gas prices jump after Arizona pipeline failure (http://www.azcentral.com/business/articles/0820Calif-Gas-Prices-ON.html)

[hammegk]

Just usual Last In First Out accounting for Cost of Goods Sold for a fungible commodity -- in a rising market at the wholesale level.

Price at the pump is an ongoing computation for every large-scale marketer, and one econometric model is much like another. Retailers too small to compute prices on their own "follow the market" or they will be out of business.

Damn economists, accountants & management who listens to them. :D Oh, and the Market too.

[AlH]

Toss in a three day weekend next week with greater demand forecast for gasoline and you have another reason they can raise prices.

The prices went up here about $0.15/gallon the day before ~25,000 college students return to start classes. Coincidence? Happens every year so I just remember to fill up at least a week before they arrive.

[Segnosaur]

I've heard of a couple of other reasons for recent price increases:

- The US governemt is diverting some supplies to their emergency reserves (not sure if they're still doing this)

- Here in Canada, the power blackout affected some of the refineries in Ontario and they were below capacity for a while. (The same may be true for refineries in affected areas of the US too.) This can be coupled with the 'panic' right after the blackout when people were rushing to the gas station to fill up their cars when the power came back on. So, supply decreased, while demand increased.

[The Central Scrutinizer]

Originally posted by Ed


If you don't know the second part, you cannot address the first.

For all outlets to be within pennies in a short time period is certainly collusion.

Wrong and wrong.

Are all the grocery stores in collusion when they charge the same price for milk?

[Soapy Sam]

"Collusion" implies conspiracy. With modern communications, it is a matter of minutes to find out what fuel prices are anywhere in the world. Companies are doing so around the clock.
At the pump, if I see one station selling at $4.50 a gallon (and yes, I HAVE converted to U.S. gallons), instead of $4.53, guess which one I go to? How long before the price across the road comes down? About 4 hours on average.
In the UK, companies like Esso advertise the fact that they are watching prices. The gimmick is that they never undercut, they just stay competitive. If BP puts their price up a penny, Esso tag right along. Inside 48 hours, every station in the country will be at the new price.

The reason we pay 2-3 times as much for fuel as the U.S. has little to do with the oil industry and everything to do with government taxation. By pretending to be "green", the gov. can justify fuel tax hikes on grounds of saving the environment. They can't lose. If we keep buying- more tax, if not- they get credit for environmental awareness. Sadly, we also shove the cost of everything that has to move through the roof, which is why our real standard of living is substantially lower in some ways than the U.S.

[Samus]

Haven't we invaded all the oil producing countries yet? OPEC's headquarters should be in Washington D.C. by now.

(NOTE: for the humor impared, this post was a joke. A gag. I'm pulling your chain. I'm not serious.)