6-23-06 Gas Gouging

It's a joke that the congress would investigate the possibility of price gouging by the oil companies these days. But it doesn't take much "investigating" to see how the gouge is done.

I've been watching the futures prices for wholesale unleaded gas for the past several weeks...

http://futures.tradingcharts.com/chart/UG/76

Because I drive a taxi, the price of gasoline is something that I'm watching every day, and at the end of the day I fill up at whichever station has the lowest price.

There's also a site where I can see the general gasoline price trend in my area each day...

http://www.worcestergasprices.com/index.aspx?s=Y&fuel=A&area=All%20Areas&station=All%20Stations&tme_limit=48

(Of course, that site only reports user "sightings" for gas prices, and their info is not reliable for actual price averages or statistics. It's just a place to find out where the lowest price has been reported by users.)

The way the gouging works is that when the wholesale futures start going upward, within a day or two the local station prices will start going upward as well. But when the price starts going downward, it takes two or more weeks before local stations will start going downward as any kind of a result.

This just happened during the first two weeks of June, where the wholesale futures price fell about 15 cents a gallon over that period. It wasn't until just this Wednesday that some (definitely not all) of the local stations dropped their prices anywhere near that amount. The lowest drop I could find, after all was said and done, was a nine cent drop.

The wholesale futures price bottomed out on Wednesday, and began going up again. As of today, Friday, it's gone up about a third of the way from where they had peaked at the beginning of June, or about five cents. Today, however, a mere two days after this change in the wholesale market, all the stations that had finally dropped were right back up to the level they were at before that recent two week drop.

Meanwhile, the majority of the stations in my area didn't drop the price of gasoline AT ALL during the entire month!

This is not very subtle, it's outright gouging. But because most people don't keep an eye on the wholesale price fluctuations and make any concerted effort to notice what kind of lags are involved between wholesale and retail price variations, this kind of thievery goes completely unnoticed by the majority of us out here in the workaday world.

Wholesale goes up, retail goes up immediately. Wholesale goes down, a few retail outlets take a couple of weeks to come down a little bit. Most gas stations take much longer. This belies the idea that price structuring has nothing to do with the record profits that petroleum companies have been enjoying during the leadership of the oil company administration. It isn't the gas station owners, managers, or franchise holders that have been making record profits.