Comments on: Katrina: Independent Gas Stations Expect Losses

By: James Joyner

James Joyner — Mon, 05 Sep 2005 13:31:12 +0000

Steve: Sure, although only indirectly. The station isn't raising prices to ration goods but to jack up their profits. They're doing it because they can get away with it, not to benefit the consumer. That's price gouging; whether it's a good thing is a separate question. Price gouging sometimes makes perfect sense. For example, if Home Depot can't jack up lumber prices after a hurricane, then it has no ability to surge mass quantities of lumber to the region after existing stock goes.

By: Steve Verdon

Steve Verdon — Mon, 05 Sep 2005 05:11:11 +0000

Kim and I paid $71 and change to fill up the tank with premium yesterday, with prices at $3.75.9 per gallon. It seems inconceivable that the station, which presumably got the gas before Katrina shut down any refineries, isn't getting a windfall from the radical price hike.

Sure, in a sense. The problem is that if they didn't raise prices then they'd run out faster and with supplies tight they might actually have to shut down. Prices are a way of rationing goods. It is really that simple. When conditions change, then expect prices to change.

By: Dr. Weevil

Dr. Weevil — Mon, 05 Sep 2005 01:50:34 +0000

It's hardly surprising that gas stations raise their prices immediately, even when they still have tanks full of gas they bought cheaper. If they don't raise prices, how are they going to pay for the more expensive gas when it comes time to refill their tanks? When prices fall and competition is tight, they may be forced to lose money if they're still selling off the last of the stuff they paid a lot for, while their competitors have already refilled with the cheaper stuff.

By: Mark J

Mark J — Mon, 05 Sep 2005 01:20:06 +0000

Bah, I should say "prices START to go up immediately." and "prices START to drop immediately." The rate at which they go up is gradual.

So basically, the graph looks like a handicapped ramp, instead of a 10 foot ledge.

By: Mark J

Mark J — Mon, 05 Sep 2005 01:14:03 +0000

Spencer, Anti "price gouging" laws are in effect. This is not a free market. And James, Gas stations do not base their prices on what they paid for the actual drop of gas that you are buying. The hedge against what they'll be paying next week. So, when wholesale prices go up, retail prices go up almost immediately. Of course, when wholesale goes down, retail also drops immediately. The benefit of this is that price fluctuations are not instantaneous, which would create strange patterns. If you knew that in 24 hours, a new shipment of "expensive gas" would be coming in, and would spike prices by 25 cents, you'd make a mad rush on the station. If you knew that prices were going to drop 25 cents, you might wait it out. But this way, price gradually change, and demand doesn't spike or dip as much.

By: bryan

bryan — Mon, 05 Sep 2005 01:09:54 +0000

On the other hand, stations can't make any money without gasoline. And customers hurting from paying that much for gas may be a bit more reluctant to enter the store to buy overpriced groceries. "a bit"? Heh. And I'm not so sure the oil companies are jumping at the chance to run small-time convenience stores all over the country with very small profit margins.

By: Herb

Herb — Mon, 05 Sep 2005 00:39:23 +0000

It's truly a shame that honest independent businessmen trying to make an honest profit have to suffer from the high price of gasoline while the oil companies make record profits. Supply and demand are one thing, but when the oil companies have full control of the supply side, thats another. I am not to sure that the oil companies would not take joy in seeing the independents go belly up.

By: James Joyner

James Joyner — Sun, 04 Sep 2005 21:43:15 +0000

Huh?

By: spencer

spencer — Sun, 04 Sep 2005 21:32:01 +0000

Sounds like a free market is working like free markets work.

So, what is your problem

this is what you profess to believe in.