Can someone explain to me why gasoline companies are allowed to play games? Today, oil

[sinkingfeeling]

prices are down 6%, to $70.49 a barrel, yet local Illinois gas stations raised the price of a gallon from $3.43 to $3.55. They will adjust gas prices on a daily bases when oil futures rise, but don't lower them when they drop.

[Bernardo de La Paz]

1. Oil bought at high prices is still "in the pipeline" metaphorically. It has to be refined & delivere

The oil has to become refined gasoline first and then be delivered. That takes time. So the price of oil at the well head is not going to change the cost of oil already sitting at the refinery.

[radicalleft]

8. Sorry that's just an oil lobbyist explanation

In the real world a camel farts near an oil well in Saudi Arabia and gas prices rise 20 minutes later...

[RobinA]

9. Unless

the price at the wellhead goes up, and then the price at the pump goes up before you can get in your car and drive to the gas station.

[WarGamer]

10. that's the correct answer.

[MineralMan]

2. Part of the problem is what the individual gas stations

paid for the gas that's in their unerground tanks. The profit on a gallon of gasoline is not large. Not large at all. So, stations try to get some profit out of the gas that has already been delivered to them. So, there's a price lag when prices go down. When prices go up, it's easy enough for a station to raise prices on gas that's already at the station. It's iffier when the wholesale price goes down.

Owning a gas station is no walk in the park. The margin on gasoline barely pays for the expenses of the station. Any profit comes from other sales in most case, from the convenience store or maybe from the service bays, if the station has those.

My advice: Stay out of the retail gasoline business. It sucks, pretty much.

[Torchlight]

3. I remember spring of 2020 when a barrel of crude was trading for less than zero.

A lot of people at my building and office were predicting sharp drops in fuel prices. Drops came, eventually, marginally-- and sure as hell not sharp.

But yeah-- it often feels like we get the pinch immediately and dramatically when oil gets expensive, but not so much on the occasions it would benefit us.

[thatdemguy]

4. I worked at a station

a long time ago for a short period of time. If the gas in the tanks costs you a buck, but the replacement gas is going to cost you $1.10 you add your profit based on what the replacement cost is. Except when the price goes down, until you use what you paid more for is gone. Ie it cost a buck, you want to make 10 cents, you sell for $1.10, if you find out the next truck is costing you $1.10 you sell for $1.20 so when it goes in the cost and profit are covered. If the next truck is going to cost you $.95 but you have $1.10 gas in the ground you dont lower the price until the $1.10 gas is gone other wise you loose money.

edit in the 90's when I worked at the gas station, the mark up was about 2.5 cents per gallon average. We made more if you bought a soda than if you filled your tank.

[Prof. Toru Tanaka]

12. I guess it is similar to bread and milk in the supermarket.

Gas gets them in the parking lot and in the door if they pay cash. And then they could be tempted to buy higher net profit items.

[ShazamIam]

5. It is the prime benefit of a, "free market economy" better defined as a seller controlled market.

Last edited Tue Nov 30, 2021, 06:14 PM - Edit history (2)

That is what 40 years of de-regulation will deliver for us, near monopolized control of each sector of the economy into the hands of a few corporations whose primary stockholders are private equity and investment funds. All controlled by a few top men at a few corporations and banks.
The, free market, was never about the consumer, labor or the environment, in fact laws have been passed to limit lawsuits against for profit companies that limit profits to protect the environment, limit consumer settlements and law suits, and of course force arbitration for consumers and labor.

We have been in a seller controlled market since the 90s and it began in the 80s.

Edit: rmv xtra the

[durablend]

6. I don't believe you're ever going to see

An equivalent drop compared to what market prices are down to. Holiday season plus "high prices make Biden look bad" = they're gonna stay right where they are.

[Klaralven]

7. Two entirely different markets

Crude oil prices are set by deals among producers, refiners and speculators on the futures exchange.

Gas station prices are set by the prices refiners and wholesalers charge gas stations and competition among gas stations.

[doc03]

11. A friend of mine used to own a gas station. He tells about one time when the

oil companies were testifying in Congress that there is no price fixing. On that very day he had to change
the price on his pumps 9 times and they ended the day the same price as it started when he opened.

[ProfessorGAC]

13. Technically, There's No Price Fixing

Technically.
The refiners don't get to set market price. The pricing model is crude plus.. That sets a soft floor on price, so their odds of taking a short term loss to be very, very low.
But, since they can take strategically timed turnarounds or lie about operational problems that require "rate reduction", they can manipulate prices upward if commodities buyers start driving prices down.
Technically & legally, that's not price fixing but it's still not true free market.
The "theory" that drove moving refined product to the commodity market was to prevent price fixing, which was already illegal under collusion laws. The move wasn't necessary.
What it really did was eliminate the element of competition based on price. The same people who crow about the importance of competition created a system that eliminated competition.
Go figure!

[doc03]

15. He had a BP station sometimes he would have to sell his gas at a loss.

Over the years he said they kept giving him a smaller and smaller profit margin. They set the price for what you buy it for and set the price you can charge, sometimes less than he paid. He said he made most of his profit on beer, cigarettes, snacks, ATM machine, a few groceries and lunch meats.

[ProfessorGAC]

17. That's True of Most

Gas margins are razor thin, even at independents.
The "captive customer" joints on the interstates or tollways are probably exceptions.
I've been hearing what your friend said from many people, for a long time.

[marie999]

14. A month ago we were paying $3.20 at Sam's Club in Jacksonville, NC.

2 days ago I paid $2.94, yesterday it was $2.93, and today, when I drove by it, was $2.83. It is 30 cents cheaper than anyplace else I have seen. I do not have any knowledge of why.

[Talitha]

16. $3.92 a gallon here for non-ethanol.

It's expensive but my 2000 Envoy runs a lot better on it.

[BeckyDem]

18. Biden Asks FTC to Examine Oil, Gas Companies' Role in High Gasoline Prices

President cites ‘mounting evidence of anti-consumer behavior’ by oil-and-gas companies



Updated Nov. 17, 2021 6:11 pm ET

WASHINGTON—President Biden called on the Federal Trade Commission to investigate whether oil-and-gas companies are participating in illegal conduct aimed at keeping gasoline prices high, in the latest effort by the White House to respond to public concerns about costs for everything from fuel to groceries.
https://www.wsj.com/articles/biden-asks-ftc-to-examine-whether-oil-gas-companies-are-illegally-keeping-gas-prices-high-11637164142