Gas Price Regulation

[Charles Anthony]

An acquaintance of mine is a member of the Power Workers' Union and he's dead set against the widespread use of wind power. His monthly newsletters have told him to be very pro nuclear and coal. If I were a betting man…actually I am a betting man. Five bucks says that both nuclear and coal plants require a lot of employees to operate.

Bingo!

I am also willing to bet that if we did have windpower, we would also see vigilante union highwaymen tearing them down. We would think city spray-paint vandalism looked like cultured and well-disciplined art.

[Jerry J. Fortin]

The unions in this country don't have the balls or brains to something like that.

[lost&outofcontrol]

It's nice to see that green projects are finally becoming more prominent.

As a capitalist, it is nice to see that saving and making more of the Almighty Dollar is what motivates it!

As a communist, I wonder why money (stored capital) is required in the first place.

[Charles Anthony]

As a communist, I wonder why money (stored capital) is required in the first place.

Can you provide one single explanation as to how the same mechanisms can actually work WITHOUT capital????

Until then, your communism will continue to be a wonder.

[Jerry J. Fortin]

Communism is unworkable, it simply doesn't take into consideration the reality of the individual. The use of "capital" is a debatable point though. There are in fact ways of doing things without it. As a matter of fact it is done daily in most parts of the world. It is called credit, the private sector version of the governments monetary policy.

[MightyAC]

It's nice to see that green projects are finally becoming more prominent.

As a capitalist, it is nice to see that saving and making more of the Almighty Dollar is what motivates it!

As a communist, I wonder why money (stored capital) is required in the first place.

Communism can be successful if we can find a way to keep people working hard when they no longer have any incentive to do so. Maybe one day we will all live to enrich our minds and improve society like they do on Star Trek TNG. However, until we have replicator technology that puts an end to all need and want the almighty buck is the necessary dangling carrot that keeps us plodding along.

[Jerry J. Fortin]

STNG was a democracy of universal proportions. Communism is not an option. Socialism is, but not communism.

[lost&outofcontrol]

As a communist, I wonder why money (stored capital) is required in the first place.

Can you provide one single explanation as to how the same mechanisms can actually work WITHOUT capital????

Until then, your communism will continue to be a wonder.

I'd rather not derail the thread more than I've already did.

[Charles Anthony]

I'd rather not derail the thread more than I've already did.

That is fair. So, let us continue some place else, shall we?

[MightyAC]

Personally, I'd put up a windmill if my neighbors could stand a structure standing hundreds of feet at the edge of my property. <heh>

We could have a windmill attached to every single power line transmission tower. The towers are ugly to begin with anyway.

Oh, but think of all of the jobs that would be lost if we converted to free electricity sources!

I was looking into, and asking around about this idea because it like I said before it sounds brilliant... however, I have come across some potential stumbling blocks. I'm not at all an expert, so if any engineer or electrician could comment that would be helpful. From what I understand electricity meant to travel any distance over wires is sent at a high voltage and low amperage to reduce the power losses. The electricity produced by windmills is typically lower voltage so it would have to be converted (I'm not sure if that's the correct phrase) before it could simply be added to the flow of electricity in the wires. If every little turbine required a power converted the process could be very expensive.

Maybe mass production of the smaller turbines and "converters" could overcome the cost problem but I don't know. Any thoughts?

[cybercoma]

I used to live in Windsor, ON, while my gf (who used to live in Windsor as well) has been living in Fredericton. The gas prices in Windsor was usually 10 cents lower, give or take a couple cents.

Here's what gas price regulation has done for New Brunswick. The price of gas in Windsor, ON is $0.957 and in Fredericton, NB it's $1.177. That's $0.22 higher and double what the difference normally is.

Regulation works.....seriously.

[geoffrey]

The hell???

We're paying $1.15 in Calgary. I'm blocking the pipes, we're keeping our oil now.

[cybercoma]

The hell???

We're paying $1.15 in Calgary. I'm blocking the pipes, we're keeping our oil now.

Yeah, my uncle lives in Edmonton and when he'd come to visit he'd get angry that gas was cheaper in Windsor. Windsor's on the border with Detroit and with American gas prices so low, the stations have to keep the price down in Windsor so people dont' go over the border to buy gas.

[geoffrey]

The hell???

We're paying $1.15 in Calgary. I'm blocking the pipes, we're keeping our oil now.

Yeah, my uncle lives in Edmonton and when he'd come to visit he'd get angry that gas was cheaper in Windsor. Windsor's on the border with Detroit and with American gas prices so low, the stations have to keep the price down in Windsor so people dont' go over the border to buy gas.

Makes sense, I guess the market is working after all.

I still don't get how the average price can be $1.15 but some stations selling at $1.08 or $1.07. Obviously there is some collusion, though how much or how organized is it, I don't really know.

[jbg]

The hell???

We're paying $1.15 in Calgary. I'm blocking the pipes, we're keeping our oil now.

Yeah, my uncle lives in Edmonton and when he'd come to visit he'd get angry that gas was cheaper in Windsor. Windsor's on the border with Detroit and with American gas prices so low, the stations have to keep the price down in Windsor so people dont' go over the border to buy gas.

Makes sense, I guess the market is working after all.

I still don't get how the average price can be $1.15 but some stations selling at $1.08 or $1.07. Obviously there is some collusion, though how much or how organized is it, I don't really know.

That sounds like an awfully big spread between highest and lowest prices.

Typically, in the US (and I'm assuming in Canada) an oil company will lower a station's price to enable it to meet prices being charged by most, but not all, of the competition in the area. Typically, they will not meet certain independent, i.e. unbranded stations, since those are perceived as less desireable to motorists. Sometimes, if they believe that a competitiors' station is charging a lower price by somehow not paying taxes of some kind, that price will not be met.

Incidentally, lower prices at a state is a common "red-flag" of evasion of various taxes.

[Charles Anthony]

I still don't get how the average price can be $1.15 but some stations selling at $1.08 or $1.07. Obviously there is some collusion, though how much or how organized is it, I don't really know.

What exactly do you mean by collusion?

Do you think that the gas stations speak to each other and decide on a price?

Incidentally, lower prices at a state is a common "red-flag" of evasion of various taxes.

They may also be struggling to survive.

Since their products are exactly the same, the only way they can increase sales is by decreasing price.

[geoffrey]

I still don't get how the average price can be $1.15 but some stations selling at $1.08 or $1.07. Obviously there is some collusion, though how much or how organized is it, I don't really know.

What exactly do you mean by collusion?

Do you think that the gas stations speak to each other and decide on a price?

Nope, too many individual owners. But obviously the cost of gas is much less, and you'd expect at least one of them to lower their price to attract business... but they don't.

Awfully fishy.

Incidentally, lower prices at a state is a common "red-flag" of evasion of various taxes.

They may also be struggling to survive.

Since their products are exactly the same, the only way they can increase sales is by decreasing price.

Which is why I don't understand why their isn't competition in marketed gasoline.

[Charles Anthony]

What exactly do you mean by collusion?

Do you think that the gas stations speak to each other and decide on a price?

Nope, too many individual owners. But obviously the cost of gas is much less, and you'd expect at least one of them to lower their price to attract business... but they don't.

What you describe is unclear but it does not seem like collusion.

What exactly do you see as an unfair business practice in our gasoline industry?

[Wilber]

I still don't get how the average price can be $1.15 but some stations selling at $1.08 or $1.07. Obviously there is some collusion, though how much or how organized is it, I don't really know.

What exactly do you mean by collusion?

Do you think that the gas stations speak to each other and decide on a price?

Nope, too many individual owners. But obviously the cost of gas is much less, and you'd expect at least one of them to lower their price to attract business... but they don't.

Awfully fishy.

Incidentally, lower prices at a state is a common "red-flag" of evasion of various taxes.

They may also be struggling to survive.

Since their products are exactly the same, the only way they can increase sales is by decreasing price.

Which is why I don't understand why their isn't competition in marketed gasoline.

Gasoline is a commodity bought on the open market just like the oil it is made out of or any other commodity. If your cost is the same as the other guy and you can't add any value to the product, it is hard to undercut him and stay in business.

[jbg]

I still don't get how the average price can be $1.15 but some stations selling at $1.08 or $1.07. Obviously there is some collusion, though how much or how organized is it, I don't really know.

What exactly do you mean by collusion?

Do you think that the gas stations speak to each other and decide on a price?

Nope, too many individual owners. But obviously the cost of gas is much less, and you'd expect at least one of them to lower their price to attract business... but they don't.

Awfully fishy.

Incidentally, lower prices at a state is a common "red-flag" of evasion of various taxes.

They may also be struggling to survive.

Since their products are exactly the same, the only way they can increase sales is by decreasing price.

Which is why I don't understand why their isn't competition in marketed gasoline.

Gasoline is a commodity bought on the open market just like the oil it is made out of or any other commodity. If your cost is the same as the other guy and you can't add any value to the product, it is hard to undercut him and stay in business.

As I explained earlier, oil companies will offer stations assistance, denominated "Competitive Price Allowance", "Zone Pricing" and similar terms. The way it works is that every station is responsible to call in to their supplier (or these days more likely e-mail) the prices of designated competitors. The company will often lower the price in order to allow the station to meet the competition. In areas near the US border, it is conceivable that the US price may be factored in, and the station will be aided to the extent of allowing it to be only, say, 1-2 cents per litre over the US price.

The game here is that if an individual station owner is making their supplier unhappy, i.e. adding too much margin to the price, not maintaining the operating hours the company wants (sometimes in excess of the hours provided in the franchise agreement), or not agreeing to contract changes the company wants, the company will often "redraw" the "map" of competitors with the effect of reducing the price assistance. In many cases, this puts the station out of business.

Trust me on this one.

[geoffrey]

That does make sense jbq. But in essence we have non-competition in the market if all the gas stations just match each others prices.

When does one station get to significantly lower their price?

This would take the sticky price theory to the max.

[jbg]

That does make sense jbq. But in essence we have non-competition in the market if all the gas stations just match each others prices.

When does one station get to significantly lower their price?

This would take the sticky price theory to the max.

The usual answer, when crude and gasoline prices are on the decline, is that one of the companies, for whatever reason, will break ranks and cut prices sharply. They'll have a surge of volume that keeps going until the market catches up.

Sometimes it's a neighborhood by neighbood thing. I remember when prices were dropping from $3.39 USD per US Gallon to $2.29, that a Mobil station on the major highway (which usually is about the average price), went from $3.39 to $3.19 in one day, then a few days later to $2.99 and then $2.93 before jumping for a short time back to $3.09. When the price crumbled back to around $2.89 at that station, a bunch of stations operated by Shell dropped to $2.55 in both Port Chester. The Mobil on the highway took about 7-10 days to work down to that level, a period when presumably the Shell stations had bustling business.

The use of competitive price allowances is more prevalent during periods of relative price stability than during a surge or plunge.