Gas price observation, question, rant-OT

Kruse · Apr 19, 2011

I guess I'll get the rant out of the way first. I just filled up my van and the price on the sign was $.10 lower than what was registered at the pump. When I went in to pay, an attendant was just going outside to change the price on the sign. Yea, I should have whined to holy h*ll, but I live with these people, so I just made a comment to the coffee-drinkers and let it slide. I know that if I owned the business, the price on the sign would go up before the price on the pump. Okay, I'm off my soap box now.

Now for my legal question of the day:
There are two stations in my town of about 700.
Station "A", (the one I just used) sells gas, liquor and convenience items.
Station "B", sells gas, oil changes, tires, repairs and the like.

One station's price of gas is always $.01 higher than the other one. Always has been. Probably always will. When a new tanker of higher priced gas comes into town, station "A" will call station "B" and tell them that they need to raise their prices, or vice versa. The practice of calling the "competitor" and telling them that the price of gas needs to be raised (or in the rare instance of lowered) has been going on for as long as the town can remember, at least 50 years. Station "A" and station "B" have different owners.

So my question is this: Is it legal? Years ago, I read about collusion or some other law that might be being broken here. Maybe I just dreamed it.
I'm sure that in a small town there would be no monopoly laws being broken. Is there any law against this? (An enquiring mind wants to know)
At the very least, at least I one reason why gas prices are being raised.

C.R. · Apr 19, 2011

sort of sounds like price fixing,but what can you do about it?

730d se · Apr 19, 2011

I am not qualified to answer your question, but have asked the same thing myself.
If you peel back this "onion" I am afraid that it will have the same root causes as the mortgage issues in our country - GREED!
One of the funny things that gas stations do is when gas prices are going up, they raise the price as SOON as the new truck load arrives. However, when gas prices are dropping, they do not. They wait until the higher priced gas is sold down and then lower the price.
I do not believe in big government, but something must be done to intervien in the many scams and "highway robberies" going on in the market place today.

It is a stupid greedy game.

big fred · Apr 19, 2011

That pretty much fits the dictionary definition of collusion and price fixing, and is generally illegal. But of course, I'm not a lawyer, and I don't understand why in most cases collusion and price fixing is illegal but it's accepted practice for realtors to charge 6% of the sale price of real estate or for lawyers to charge 30% of the award in a civil suit.

Dean · Apr 19, 2011

No. Collusion to set prices so as to avoid competition is in deed in violation of both federal and (most/all?) states law.

That said, such laws are rarely enforced and gasoline retail dealers associations have colluded to set prices for decades.

Dean

paul · Apr 19, 2011

In New Ulm, there was a Clark station that was always the cheapest gas in town. Whatever the price was, they were a penny to a dime less. Always.

After several years, the other stations in town got together, and bought this gas station. They pulled the underground tanks, and sold the property. Over the years it has had a coffee shop out of a van, and of late a plastic greenhouse selling flowers for a couple months a year.

It was in the paper, interviews with the other gas station owners, that they got together to get this station out of business.

Kind of a lesson in business I guess. The American way is not to inovate, but to get rid of your competition.

--->Paul

tlak · Apr 19, 2011

I think it's price fixing and the penny or two or even a dime difference does not make it competitive. If nobody does anything about it then it's not going to change.

Anonymous-0 · Apr 19, 2011

Collusion has always occurred in the oil business, and always will. Back in the '60's, my grandmother was a bookkeeper for a gasolin wholesaler/"jobber" in the area. I once overheard her telling someone that her boss had called the other "jobbers" in the area, because one station in town had dropped his price drastically. The "jobbers" then got together and went to see this station owner's "jobber" to tell him that his retailer needed to "get in line" with everyone else.

Now, my grandmother is a good, honest woman...usually. But when I later asked her about it, she then said that no such thing had ever occurred, and that she had never said anything of the sort. But I know what I heard, and I know that before the day was out, the renegade station owner had "gotten in line" and raised his price to match the other retailers in town.

The reason that collusion isn't ever prosecuted is because, in most cases it comes down to a "he said/she said" situation, and there's no smoking gun like a tape recording of actual conversations. And nothing EVER goes into written form!

DCM · Apr 19, 2011

So when the economy or struggling economy gets knocked again what will happen then thanks to these gas prices.

buickanddeere · Apr 19, 2011

Ever check the price that German,Japanese & Chiese citizins or industry pay for gasoline, kerosene & diesel?
How do these contries manage to be world economic leaders?

Mike M · Apr 19, 2011

Now if the sign was higher then the price on the pump would anyone say anything ????

It has to be some sort of price fixing and if we tried it we would be in jail. Here in Wooster Ohio when one place raises the price within minutes they are all the same price ! And we have many many stations.

Stations used to get in trouble for raising the price before the new load showed up ,but not anymore. I talked with an older fellow who was an independent station owner who got in trouble for this where at the same time the company owned stores did not.

RodinNS · Apr 19, 2011

It's probably not legal.... but for a town of 700 supporting two stations.... it seems to be keeping them in business. I'd think a potential rat would ask themselves how badly they want to go to the next town for gas before doing too much complaining...

Rod

rrlund · Apr 19, 2011

What gets me about it all is that the fund managers who are driving it HAVE to have money in other places besides oil. I don't know why they're risking crashing other markets because of it?
They were just saying on the local news at noon that there's a glut of oil. So much so,that OPEC is cutting production. They said it's purely speculators betting that problems in the Middle East will escalate. (no further comment on that one)

Vernon in Ks · Apr 19, 2011

Hey Kruse, Wife says swather needs to go. Call me.

John (C-IL) · Apr 19, 2011

I can't see why it would be necessary to call the competitor, they have a big sign in front of the station that tells them what they are charging. The next load that the competitor gets they will be raising the price anyhow.

When I was in the fuel business an "insider" would call a couple of days before a price increase. We would haul 24 hours a day to get all of the storage tanks filled prior to the increase.

Errin OH · Apr 19, 2011

We have a similar deal here. Two stations, one always a penny cheaper. That's called playing on STUPIDITY. "OH crap I will save a whole 10 cents", 30 cents if you have a 30 gallon tank. Stop falling for it and support the station that serves your town.

In my case, it is the penny higher station. I suspect if you took a real look at station "B" in your case they better serve the town. Who is going to change tires, replace belts, and change oil for little old ladies.

As far a legal, I doubt it is the one station in collusion with the other. The one just lowers the price to beat the other by a penny. They probably get gas from the same delivery truck unless it is a franchise operation.

Matt from CT · Apr 19, 2011

Around here, doesn't matter if a new tanker arrives or not.

None of the gas stations own the gas.

They ALL sell it on consignment.

The prices are set by distributors who own it. They're the ones who call the station and tell them what price to sell it for today.

The store contracts give them a fixed cents-per-gallon commission that's designed to cover the variable cost of sales (such as credit card fees) and leave them about 8 to 10 cents a gallon in gross profit (from which rent, overhead, employees, income and property taxes, etc had to come out of.)

The first run up in gas prices was hurting a lot of them because there commission are based on fixed cents per gallon, but higher gas prices meant the credit card fees which are assessed proportional to the amount of the sale doubled...cutting deep into that 10 cent profit they were aiming for. So for awhile their commission contracts and their variable expenses were out of alignment.

Mike (WA) · Apr 19, 2011

Probably "technically" illegal, but I suspect they have maintained the same mark-up through the years, so it would be difficult to prove damage to consumers. After all, it would be perfectly legal for them to watch each other's signs, and for A to change his price when B does- so calling ahead just eliminates the need for them to watch each other's signs.

The more serious situation would be where they agree to make their markup some ridiculous amount, based on the fact that the nest nearest station is 50 miles away. So long as their mark-ups are typical of other similarly-situated stations (ie, small town, low volume stations), they'd probably be OK.

1936 · Apr 19, 2011

Gas is only up a buck in the last 12 months - see what happens in the next 12 months. Just think what a couple of sand nations can do do your spending. $4.17 here and moving up.

oldironman · Apr 19, 2011

Have you ever heard of organized crime. Maybe not in your case,but higher up, I know, been there and seen that. If you don't think so then get in that business.

Traditional Farmer · Apr 19, 2011

Not true Independent Stations have to pat when its delivered unless they have a charge account either way they buy it at delivery

Doug in Illinois · Apr 19, 2011

In my little town of 1500 there are now two gas stations left. One of the regional chains played pricing games a few years ago and one of the three that was there didn't make it.

We are down to two. The "chain" store has hopefully met it's match. The "new" owner of the independent store has middle eastern roots, and is giving them a run for the money if you don't mind waiting in line sometimes. He is right now 8 cents cheaper than the chain store, and has been for the last week. It is good gas, he is a Sinclair station.

Maybe gallons sold (volume) and low overhead (he runs it himself) make up the price difference. DOUG

RodinNS · Apr 19, 2011

More likely it's been a while since weights and measures has been around to see the pumps...

Rod

Old Roy · Apr 19, 2011

You are correct gas is priced out by the distributors on a daily basis. they go by the daily rack prices "Rack" meaning a terminal where loaded .

hd6gtom · Apr 20, 2011

If the US government would remove gas and oil from the speculators, the price would be around 2.00 per gallon today.

36 Coupe · Apr 22, 2011

Fuss all you want but it would be hard going with out gasoline.My work horse harness was hung up in 1966.I notice that people are running the roads like it was still 25 cents a gallon.

farmer boy · Apr 24, 2011

I know it"s not legal "here". but then I"m in Canada. It"s anti-copmetive and price fixing and gas stations have got big fines for it before

Gas price observation, question, rant-OT

Kruse

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