https://edition.cnn.com/asia/live-news/coronavirus-outbreak-03-09-20-intl-hnk/index.html
so here is a dilemma. if the fundamentals of supply and demand change, then is it price gouging? and how much of a price change would amount to price gouging? that's a tough one. 20%,50%,100%?, 200%?...
with so many things getting cut off (supplies from china), i have noticed a couple things here. the price of honey locally went up a little. and also the price of jars went up (about 15%). so yes, i am raising the price i charge for a jar of honey. but only by about 15% for now. that is not normally what you mean by price gouging. but i am sure there will be a customer or 2 that will make a comment about it.
i also think a friend of mine is having trouble getting a large supply of jars.
when i go thru walmart lately i notice they are a bit low on their supply of jars (and there are no jars from china). (in the past, walmart always had some jars from china).
As is the case frequently, the regional distributor of gas is ripping people/consumers off.
When the price increases in the futures/cash market they jack up the price at the pump THE NEXT DAY
When it drops, they always take numerous days to cut the price at the pump and usually not by the amount that mimics their lower cost.
The price of gas in the futures is incredibly low at 1.06 right now, almost 50c lower than it was just a week ago and 90c lower than what it was back in December. At the pump it should be below $2 right now.
Here in Evansville, it was 2.12 on Tuesday and still that price on Wednesday with the regional distributor probably making at least 20-40c more than they were a couple of months ago, when the price was higher.
https://www.gasbuddy.com/GasPriceMap?lat=37.85730855178976&lng=-87.187291125&z=4
https://wbng.com/2020/03/10/how-long-gas-prices-are-expected-to-continue-to-drop/
| Gas prices are dropping, here's why Gas prices across the country are dropping, largely due to two factors: fears over the coronavirus are causing less people to travel, and an international oil dispute has led to a plunge at the pump. wbng.com |
The reason that all the gas stations "know" when to change prices at the same time and same amount.
There is a regional distributor that sells all the same gas to all the stations and charges them exactly the same rate. When the regional distributor increases the price, it goes up by the exact same amount at the exact same time for every station. This also means that its also the exact same gas at every station.
People will avoid going to Thrifty or some other gas stations because they think it cheap or inferior gas. It's all coming from the same place.
I tried to figure out how they get away with this price gouging but its obvious tied to governmental authorities looking the other way when they do this or having laws with many loopholes.
Not sure what their criteria is for price gouging but there clearly is alot of play with regards to an acceptable price range based on particular circumstances. I would bet that they can sustain a certain price at X cents higher for Y days beyond what you and me would consider fair for A, B and C reasons...........sort of a temporary loophole.
I say this from hundreds of observations.
The price ALWAYS takes much longer to go DOWN at the pump than it does to go up. One excuse that I heard in the past was that the gas they have in their tank cost them more, so they can charge the higher rate for that gas even though new gas in the market place is much cheaper.
At the same time, I heard them justifying an immediate price hike, the day after it does up in the market because that is going to be there cost to replace the gas stored in their tanks.
They get to have their cake and eat it too.
But it goes way farther than that. They used to always hike the price of gas a couple days before a holiday for years to get travelers. Higher demand they say. I've not noticed that as much recently.
But the biggest one is when there are massive drops in the price like we;ve had recently. Down 90c in the market since December but down more like 40c at the pump around here. I think that the biggest part of this is people not realizing they are getting ripped off and complaining.
Most people are looking at the price dropping 40c and saying "Yippee" and hearing that it will drop more "Yahoo".
The middle man/regional distributor increased their take by 30-40c and is ripping people off who are celebrating over the price dropping from where it was.
Another item. On certain days, the price will spike 15c higher for what appears to be no reason or for a lame excuse of a reason.
In early Feb, when we had the first stock market crash from the Cornonavirus news in China, the oil markets crashed, along with gasoline prices dropping 12c. The price of gas here, went from 2.22 up to 2.49 the next day.
WTF???
How do they justify increasing the price they charged by 27c when the price they paid for the gas went down 12c?
They will often use extreme news to justify brief spikes higher like that .............which don't actually effect supply/demand or their cost. There probably is a list of criteria that they use and abuse for doing this sort of thing and nobody sees it. We just see the changes for the price charged at the pump.
I would bet that milking this criteria and abusing it to the max is worth many billions.
99% of consumers are not following the actual market price and even those of us that do, can't understand the loony price changes and prices at the pump that don't match up with the market at specific times.
Here's another one that was ALWAYS a huge problem before fracking and most of the production was in the Gulf.
Any time a major hurricane would threaten the Gulf of Mexico, gasoline prices would go up around 10c, sometimes more than 20c though. Every dang time.
The price would jump up all at once every time. Then, after the hurricane passed, even with no damage, it would take a week or so for the price to ratchet back down to the pre hurricane price level.
There must be something that allows them to do this legally based on a natural disaster threat..........and they used this tactic over and over and over.
Maybe patrick understands this dynamic better than me and can explain some things that I don't know about.
By metmike - Jan. 28, 2020, 1:16 a.m.
Can you believe that the regional gas distributor in this area of the Midwest would use the Coronavirus scare to price gouge us on gas prices????
Update: The Coronavirus has been causing almost all the markets to sell off, including the unleaded gas market.
However, the unleaded gas market already has it own very bearish fundamental reasons to drop..........the highest stocks in history!
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WGTSTUS1&f=W
Unleaded gas price:
`less than 1 year chart below. As you can see below, the price has plunged 25c from the highs earlier this month(this was written on Jan 28th-we are now down over $1)...............and justifiably from the standpoint of there being a GLUT in supplies.
So yesterday, in the face of this price plunge to the front month Unleaded and cash price and reasons to LOWER the price, the regional distributor of unleaded(to all the gas stations) jacks up the price 28c!!!
I'm assuming that was the source since everybody gets their gas from the same place and every station increased the price by the same amount to $2.49.
There is often a psychology in place in pricing gas. When prices have been higher for awhile, people get used to paying that price and will accept it. When the futures/cash price drops, as they have and should pressure prices at the the pump by a similar amount.........those pricing the gas at the regional distribution hub know that people are not following the unleaded commodity market, EIA reports and fundamentals..........and have little choice in shopping around because THEY set the price that ALL the local stations pay to get THEIR gas.
So they price gouge. Maybe only 5c or 10c for a short while by NOT dropping the price they sell their gas at, even though they are buying it cheaper.
Do you ever notice the sudden jumps in price for what seems like no reason?
Or just before holidays or key traveling time periods?
And how does every gas station in town know to suddenly increase the price of gas at almost the same time?
Yeah, that's them.
Hi Mike
Here are some prices we saw on pumps from Taylor Mich [you would know that as part of what we call Detroit, Michigan
Following were the price posted from Taylor Mich to the ferry at Wapole Island going east on 1-94. Most of the prices were when we left 1-94 on Thurs 13/2019
2.00
2.10
2.20
2.22
Of coarse we stopped at the 2.20 pump. Once back on the road we saw the lower prices but that is our fault for not price shopping, and also how many pumps and the price, are left before we reach the ferry
Here's the quintessential example of some gas price gouging........using a crisis to take advantage of people:
https://www.marketforum.com/forum/topic/48897/
By metmike - March 14, 2020, 1:46 p.m.
Thanks Tim!
Most people remember what they did the day of 9-11-2001.
I can tell you about the entire day, especially the early portion, when somebody here actually alerted us to the first plane crash on MarketForum.
Later that day, I took my 2 sons to their regular private piano lesson. After finishing, I couldn't back out of the driveway because there was a line of cars going up the street for a block. What the heck? This was a residential street without much traffic usually.
After I got out, we saw the reason. They were all lined up to get gas at the gas station around the corner.
Everybody was panicking because they thought that the 9-11 attacks were somehow going to cause our supply of gas to get cut out. Rationally, this made no sense.
So I called my wife and asked her what everybody at her work thought. She said they were all gone to get gas in their cars. I told her "Do not leave to get gas, you can get it tomorrow and not have to wait!"
Then I called my Dad in Detroit "Dad, DO NOT go to buy gas today, wait until tomorrow or later in the week!"
When I got home, I read about some stations price gouging, jacking up the price $1 to take advantage of the panic. Fortunately, Locally, I think they only increased the price 20c or so...................to take advantage of the panicked consumer but this was still pathetic because the people in that business knew with 100% certainty what was going on and there was a 0% threat of the supply disruption that everybody was panic buying over and they intentionally decided to take advantage of them because of their ignorance about how that market works.
https://www.consumeraffairs.com/misc/price_gouging.html
metmike: That situation is very relevant here. We are being price gouged at the pump right now for one thing. Yeah, prices have dropped at the pump and people are celebrating but 30-40c worth of the $1 price drop/cost to regional distributors is NOT being passed along right now.
Another element is peoples panicked buying of stuff at the grocery store. Pure emotion/fear of the unknown and speculating the worst.
I am all for these cancellations/shut downs to stifle the spread of the Coronavirus. It's a controlled action that makes good scientific/medical sense. For me, it's very reassuring that we are doing some smart things to keep this from getting too out of control.
But this is rational thinking.
Many folks are interpreting that to mean that they will lose access to food and toilet paper and basic necessaries so they better stock up now while they can................just like they waited in 1-2 hour lines to get gas on 9-11-2001.
In a couple months, the Coronavirus will still be around.......in diminished numbers and we will all look back at this time frame, yes, this exact time frame with regards to the PEAK panic with the perspective that it deserves.............. a very extreme over reaction of thoughts, fears and actions by people.
Again, shutting everything down was/is smart..............not an over reaction because that WILL take away the environments best suited to spread the virus.
I guess stocking up on 6 months worth of toilet paper means you won't have to buy toilet paper for a long time.
Funny thing is that this is how I buy normally. We still have a couple of months left.......I think, I haven't checked lately.
If I went in and bought another 6 months worth today, they would think I was doing it because of the panic.
You hit the nail on the head Mike. "I think that the biggest part of this is people not realizing they are getting ripped off and complaining."
When you consider that there is a certain percentage of the population that don't even know who the President is, you can bet they don't know that unleaded futures prices are $1.00 less than what they are paying at the pump.
But I did see gas for $1.69 here in NE Ohio.
Thanks Jim!
Gas prices are still too high at the pump and have some work to do on the downside until they reach "fair" value:
https://www.gasbuddy.com/GasPriceMap?lat=38.822395&lng=-96.591588&z=4
I've been driving on fumes, waiting for lower gas prices. Finally filled up. Paid $1.73 today at Sams in Evansville IN. What's the price where you live?
Futures price for the front month/April below: