Friday, July 30, 2010

How come price fixing, is not only allowed, but required for gas and oil prices while it is illegal for all?

other areas of retail??? There are many different companies who drill oil, yet with that particular trade if one company raises it's prices per barrel of oil, all oil now costs that amount per barrel, where as with any other industry, competitors agreeing to set their rates at the same price would be illegal.How come price fixing, is not only allowed, but required for gas and oil prices while it is illegal for all?
It might have something to do with policy of the administration. Gas companies in this country have to deal with the US. They are the ones with record profits, it's not just OPEC. 70% of the cost of gas goes to gas companies in the US.How come price fixing, is not only allowed, but required for gas and oil prices while it is illegal for all?
I'm not a fan of big oil by any means, but I'm not sure you understand how this works. Firstly, its not fixed. If you mean the barrel price of oil, its a publicly traded commodity, and it fluctuates like any traded item daily (hell, hourly!). Secondly, its not fixed at the pump either. As I'm sure you've seen, the price varies from station to station, town to town, region to region.
Who told you oil prices are required to be fixed? Not true at all. It is one of the most freely traded commodities %26amp; prices are fixed by contracts. When you hear prices quoted per barrel that is simply the quotation of the last contract price for a particular grade of oil before trading closed for the day on the spot price market. It is entirely possible that only ONE contract among thousands was sold at that price all day.





I seem to recall that decades ago the government fixed prices for US produced natural gas but those days are long gone.
Wow. Prices aren't fixed by AMERICAN companies for oil; they are set by free market supply and demand, with support from OPEC.





US has no ability to enforce our law on oil producers. They can charge what the market will bear.
Having been in the gas business for years, I can tell you that there was absolutely no price fixing happening. It is a hugely competitive and cutthroath business. I had to keep tabs on the gas prices all over the city at all times in order to balance being competitive with making money.





If someone raised prices to say, twice the normal profit marging, there there would always always always be someone near them that would undercut them by some amount in order to steal all that business... then they would be undercut themsevles ad infinitum until the normal street price stabilized near the break-even point for everyone.





So it is practically impossible for the price fixing you describe to occur in practice on any scale whatsoever... its just way too competitive, margins are close to zero already. In fact Visa makes more money on a gallon of gas than the gas station (yes, its true).

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