Posted on 04/03/2019 1:36:53 AM PDT by ExGeeEye
This has probably been asked and answered. I may have actually read, or more likely, scrolled past articles and threads containing the Answer.
Therefore, do pardon me, and if you cannot, please feel free to pile on all the ridicule you can muster-- IF you know the answer.
And also, IF you know the answer-- please share it.
Here goes:
--Gas prices always seem to rise in unison.
***Almost as if there has been a conference among the various gas companies for the purpose of fixing the prices.
QUESTIONS:
1. Isn't price-fixing illegal?
2. If price-fixing is not occurring, what accounts for the in-unison price rises?
3. Do they think we don't notice, or care?
4. Do they notice that at least a few of us so order our lives that we never need buy gas on the day of the simultaneous price hikes, or for several days thereafter? Are they accounting only for customers who, due to length of commute or the nature of their work, must empty their tanks over a couple of days and must buy gas when they can get it regardless of price?
In the market today there are only a few refineries, so gasoline no matter the name brand on it comes from just a few refineries they all get girl gasoline from from the same refineries.
There is an applied ‘science’ to pricing...days of the week...hours of the day...before or after holidays, etc. All of this is based upon polling and data collected over the years, and the chains pay for the ‘advice’.
The days where the manager had to physically up the pricing on stands are way gone. It can be set from a desk in the operation, and you could have six to eight different prices throughout the whole day. You can ask any of these managers about his competition and he’ll pull out a listing to suggest how he has some strategy set, and they all try to stay near the competitive edge (yet still make an acceptable profit).
It is a commodity...when wholesale goes up all stations go up a similar amount percentage wise (some are cheaper all the time based on additives/detergent or lack thereof). Some “wiggle room” based on when your next truckload arrives, but most stations raise/lower prices based on the announced price of their next load.
http://futures.tradingcharts.com/chart/RB
a number of years ago there was a sharp increase, brief in nature but substantial, perhaps near one dollar a gallon. IIRC it was an availability issue.
my local gas station said he wasn’t going to raise the price on the gas left in his tanks and he had gas lines.
I spoke to him, and said frankly, I rely on you to provide me gas and I rely on our relationship to be sure I get gas, right now you are draining your tanks to any Joe who drives over, not holding it for your established customers.
within an hour he posted the higher price.
The prices rise when the refineries have to alter the chemical mix of the gasoline to offer a product better suited to hot weather or cold weather. While that’s going on, they are also doing a lot of maintenance on the equipment at the refineries.
An additional factor is that they expect more demand in warm or hot weather, as people drive more for recreation and vacations.
They know when you get a raise. They take it.
Michigan limits price changes to 2 in a given day. Just FYI.
CC
First, gasoline prices are set at the pump so that the station owner can refill the tanks and stay in business. The price is set based on what the owner believes the cost will be to refill the tanks. If the future price is going up, then the gas currently at the station has to be sold at a higher price so that there will be enough case to refill at the higher price.
Second, most areas of the country are served by very few sources of gasoline. For instance, in Denver, there is a pipeline run by Philips Petroleum which originates in Texas. A lot of different gasoline stations are filled by trucks which are filled at the Philips pipeline terminal. The pipeline is “scheduled” out of the Philips home office in Bartlesville, Oklahoma. I have worked at both the terminal and in Bartlesville. There are additives put in by the various vendors to differentiate quality.
The point is that transportation costs for the Denver gasoline supply is shared by a lot of different gasoline vendors. And the cost for the transport is essentially the same for all. I have no idea how the sales price at the terminal are set for each vendor.
Gasoline is a commodity whose price, by the barrel, is dictated on markets like the Chicago commodities exchange. Being a commodity, the margins are thin and the customer prices at the pump will not vary much from vendor to vendor. This is not because of collusion, but because it is a commodity.
During the late 1980’s, it was distressing to see the government step in and try to “protect” the consumer. The Feds made a rule that the companies who controlled the distribution; e.g., Philips Petroleum for Denver, were not allowed to favor the company stations in the face of shortages. Thus, Philips had to supply gasoline to cut rate gas stations in the same quantities as prior months. The result was that Philips gas stations chose to not raise prices and ran out of gasoline since they were selling at a cheaper price. (If they had raised their price, pundits would have stepped in and criticized them for gouging.) At the same time, since the quantities were guaranteed, the cut rate stations had gas and raised their prices! So the cut rate stations took advantage of the government rules by gouging customers.
2. If price-fixing is not occurring, what accounts for the in-unison price rises?
Unicorns.
3. Do they think we don't notice, or care?
They don't care what we care about as long as they get their money.
4. Do they notice that at least a few of us so order our lives that we never need buy gas on the day of the simultaneous price hikes, or for several days thereafter?
Yes, but they take that into account.
Are they accounting only for customers who, due to length of commute or the nature of their work, must empty their tanks over a couple of days and must buy gas when they can get it regardless of price?
Yes, but their impact is negligible.
I used to work in the gas station business and most people dont know or realize selling gas is a far far distant second to where the money is in the business. Far far and away, its cigarette sales and junk food. ie. 5000 gallons of gasoline and the profit is maybe 10 cents a gallon ( or less) . thats 500 dollars, thats peanuts when compared to a dollar or more per pack of smokes and at least a 50% mark- up on junk food. The gas gets them into the station, the extras pay the bills and send the kids to college.
How does the station owner of brand A at location 1 know to raise the price at the same time and to the same amount as the station owner of brand F at location 6, nine miles away?
And so do owners B through E at locations 2 through 5...
1. I don’t get a raise every week.
2. The price does come down. Never in unison.
Regardless of all the various factors that go into it, and I fully admit that they are many and I’m no expert, it sure feels like the price of gas has a floor that nobody will drop below, but no ceiling, and the past few years has seen the bottom end coming higher and higher.
Time to trade for a hybrid?
Yep, it’s once a week.
In unison.
Like an orchestra conductor somewhere has twitched his baton.
That is what I hear...notice that almost ALL stations have the mini-mart nowadays. Lack of “diversity” in refineries leads to slim margins by region, hence the “Mini-mart”!
bookmark
It used to be the price was dependent on the current shipment of gas dropped into the tanks. I guess that is no longer the case. The price would stay the same until the next shipment if the price was different.
QUESTIONS:
1. Isn’t price-fixing illegal?
(Yes. But there’s a workaround. See below.)
2. If price-fixing is not occurring, what accounts for the in-unison price rises?
(I spoke with the owner of a single gas station store. She said that most of their money came from beer, cigarettes, lottery tickets and other stuff not related to gas. But if her price was a few cents below the station across the street that drove all the traffic to her station until she ran out. It could take a week to get a tanker. It is illegal (in Florida, at least) to change the price until you have bought new gas at the higher price. During times of crisis each night a tiny tanker comes around, pumps in 100 gallons and leaves a ticket for a gas sale at the new price. She raises her price. The Circle K manager told me they subscribe to a service and change their price several times a day based on some formulae. (Don’t know how that works with the law.))
3. Do they think we don’t notice, or care? (Stores make a few cents per gallon on gas. Their objective is to use gas sales to generate traffic to sell beer and lottery tickets.)
4. Do they notice that at least a few of us so order our lives that we never need buy gas on the day of the simultaneous price hikes, or for several days thereafter? Are they accounting only for customers who, due to length of commute or the nature of their work, must empty their tanks over a couple of days and must buy gas when they can get it regardless of price? (They literally don’t care about gas sales for the reasons above. They just need gas to generate traffic.)
For the same reason that the price of bread, peanut butter and ground beef rise and fall together regardless of the grocery store you use and are are priced similarly in a rejoin. If the demand for bread rose the grocery stores would all raise the price of bread at approximately the same time. No collusion that’s just how it works
The market keeps the price as low as the demand will allow.
Everything else, or almost everything else you buy behaves this way across brands.
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