Sorry dumb question. Why don't oil companies compete with each other on

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the retail price of gasoline?

[NorCalDem]

1. Cause how would they make so much profit then? Duh! n/t

:sarcasm:

[Silverhair]

2. They do. But they also all face the same market forces.

The end result is that the prices are about the same.

[longship]

3. Cartels do not compete by definition.

nt

[punpirate]

4. Because that's the way...

... cartels work. :)

[northzax]

5. it's not that simple.

gasoline, in general, comes from wholesalers. the Mobil and the BP on the opposite sides of the street probably buy from the same wholesaler, (it's the same gas, you know, with a few additives) so if they drop the price, the lose money, the individual stations don't have a big margin on a gallon of gas, a few cents really.

[Zynx]

6. There are actually laws that prevent them from competing as well

as the fact it simply doesn't make much sense for them to do so. The amount you would have to cut by to intice a huge number of new customers would compress your margins by more than it is likely worth.

[Egalitariat]

12. Multiple gasoline blend requirements give a de facto gov't-guaranteed

franchise to individual refineries. There is no competition. It is illegal.

[brmdp3123]

7. I'm not sure they don't...

Exxon and the other 'bigs' are consistently more expensive that the smaller companies, at least where I live, but of course that's the opposite of the way it usually works!

[Road Scholar]

8. collusion around the president's desk just like the drug

companies and insurance etc. A major problem in this country.Lobbyists

[MichiganVote]

9. Globally they do. They use the US military to do it.

Eventually they'll use the military in the US to do it too.

[Jose Diablo]

10. Good question

I've wondered how the oil companies are allowed to own the retail outlets. I know that as late as the 60's all retail outlets were franchise owned and operated. But something, law wise, happened in either the late 70's or early 80's to allow the oil companies to own the retail outlets.

Just speculating, but maybe it had something to do with the oil depletion tax credits the oil companies used to get. Maybe that law was modified and in return the oil companies got the right to own the retail outlets in addition to the pipelines, refineries and oil fields. Maybe they got exemptions from the anti-trust laws in return for the modifications to the oil depletion tax breaks.

As for competition in the upstream part of the delivery system, there is none. Although it would have to be proved, I am sure the companies are using some form of signaling their wholesale prices to each other. Probably through the American Petroleum Institution.

Edit: I remember reading someplace that there was a lot of court settlements from the 80's where franchise owners were suing the oil companies over violation of contracts and it seemed to me the oil companies were trying to push the franchise owners out of the way. Maybe it had something to do with franchise owners had in their contracts that the oil companies could not allow another franchise within a certain geographical distance from the franchise owners place of business, something along that line.

[hootinholler]

11. Because they all hire a price monitoring company.

To analize what a given local fuel market will bear retail. This is why you see clustered gas prices. Ever notice that some local markets (within say 30 miles) are faster to rise and others are faster to fall?

-Hoot

[tx_dem41]

13. Ummm...why do you think they don't? n/t

[leesa]

14. How would they make megabucks then?

Big Corporate priorities have NOTHING to do with healthy competition. Competition drives the prices down...why would they want to do that?