Who really controls gasoline prices?

My wife and I recently had a discussion about the price of gasoline.  She told me that she had noticed an increase of $0.20 per gallon at the local Chevron station during this past week.  She drove by the station at a little before 9:00 AM this morning and the price for regular unleaded was $4.15 per gallon.  When she drove by the same station at a little after 2:00 PM, the price was $4.19 per gallon.  The one question that emerged from our discussion was to ask  who really controls the price of gasoline?

There have been an endless number of news reports about what causes the price of gasoline to go up or go down.  The news correspondents have a number of similar reasons for the price fluctuations.  This week’s reasons included the unstable situation in the Middle East, a refinery somewhere on the east coast was shut down, and the continued rise of China’s consumption of petroleum products.  I generally take what I hear being reported by news organizations with a grain of salt.  But this rubbish they’re feeding us just doesn’t add up.

Let’s consider the current instability in the Middle East.  During the 4th quarter of 2011, there was a great deal of instability in the Middle East.  Actually, when is there not instability there?  From the end of September 2011 to the end of January 2012, the national average for the price of a gallon of gasoline went down by about $0.20(1).  China’s energy consumption has been increasing for decades.  Why would someone explain the current increase in retail gasoline prices as being the result of China’s consumption?  And why is the cost of gasoline going up on the west coast because a refinery was shut down on the east coast?  Do they ship gasoline refined on the east coast to consumers on the west coast?  What about the refineries here on the west coast?  I suppose they ship to the east coast?

The Internet is generally a good place to search for information on just about any subject.  If you have something that you’d like to know more about, all you have to do is enter some keywords in your favorite search engine.  That is unless you want to know who controls the retail price of gasoline.  When you put that into a search engine, you get endless repeats of the same explanations.  I love the explanation that says the gasoline stations set their prices at the direction of their corporate franchise owners.  I guess I could accept this explanation if each same-branded station in a given area was selling gasoline for the same price.  If you drive around, you will see that stations with the same brand name clearly do not always have gasoline selling for the same price.

When a gasoline station receives a load of gasoline to fill their tanks, I would imagine they have to pay for the gasoline that is delivered to them when it’s delivered.  But I have noticed that the price a gasoline station charges can change several times between gasoline deliveries.  Wouldn’t it be more fair to the consumer to consider the price paid for the gasoline wholesale, add a profit and then sell the gasoline retail for the resulting amount?  The price at the pump would only change after each delivery.  Since several stations with the same brand name frequently sell at different prices, it seems that the individual station owners must have more control concerning the price they charge than we have been led to believe. And since the price of gasoline seems to go up or down everywhere at the same time, I think it’s logical to assume direction for these changes originates from one source, probably a cartel.

A little over 30 years ago, there was a very good movie starring George C. Scott and Marlon Brando, the title was The Formula.  If you’ve never seen this movie, I recommend it.  You can rent it on Amazon.com Instant Video.  This movie came out after the oil shortages of the late 1970’s.  I doubt anyone outside of the big oil cartels will ever know the extent of the power of these organizations.

The last news report I saw a couple of days ago, concerning gasoline prices, included an interview with a man-on-the-street.  This person said that someone should do something about gasoline prices because they are too high.  Well, as long as we continue to use gasoline to fuel our transportation, there is nothing we can do about the cost of that fuel.  One thing is certain, gasoline prices will continue to rise.  Why shouldn’t they?  If you were running a cartel that controls gasoline distribution and you enjoyed making huge profits, you would do exactly what is being done now.  You would continue to raise prices, gradually, so that you can make ever-larger profits without crashing the economy.  What choice do we have as consumers?  None, as long as we use gasoline as our primary fuel for transportation.  Have you noticed how much of a profit Exxon Mobil made recently, or BP, or Shell?

1. GasBoddy.com

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