If we’re going to compare gasoline prices in the US vs. Europe, shouldn’t we also account for related factors such as differences in vehicle sizes, fuel economy, and mass transit (or lack thereof)?
There is absolutely no evidence of this. The FTC even looked into at the end of the Clinton presidency and found absolutely nothing to back up Clinton’s charges that some sort of conspiracy was happening.
This makes no sense. Of course oil is a “scarce” resource, just like everything else. All “scarce” means is that there is a finite quantity of it and people are competing over who gets to use that finite resource. If it weren’t scarce, there would be no way to sell it. It would be like selling air. Everything that we sell is “scarce.” Prices arise as a way to most efficiently allocate it. Because there is a finite quantity that means that when demand rises for that finite quantity, prices rise.
You’d also need to talk about the difference in tax philosophies, population densities/distribution and perhaps the price of tea in China.
Do the words ‘what the market will bear’ mean anything to you? In a competetive market companies are going to charge the least they can to undercut competetors while also trying to maximize their profits. If, say, TEXACO or BP COULD lower the pump prices significantly while still maintaining profits you can bet they would. Why? Because they would get a bunch more customers. Example: Here in New Mexico the indian pueblos can sell gas with essentially no tax on it…for about .10 less a gallon than stations not on the rez. Myself, I'll drive out of my way to hit the one on Tramway...and there is always a long line there of other folks who feel exactly the same way. And thats to save 10 cents a gallon. I'd probably jump through hoops to save, say, .15/gallon…and I wouldn’t be jumping by myself.
-XT
I don’t and I am. But sometimes if you blow smoke there really is a fire.
/em Tosses water on Bob
There, that should fix it. 
-XT
Why drive all the way out to Tramway and Rainbow? If our point of comparision is the local Philips 66 or Chevron, I bet I can save just as much money by gassing up at Costco or Sam’s. The only time I ever gas up at one of the pueblos is when I’m low on gas and already out there (going to/coming from the casino.)
Now there’s a question. How do places like Costco and Sam’s manage to undersell by about the same amount as you’d see if you drove all the way to Sandia to get the low-tax gas?
At least you’re honest! 
Well, there hasn’t been a new refinery built in the US in 30 years. Add to that the closing of many existing refineries, and things don’t look all that bright. However, the closed refineries tended to be the smaller or less efficient ones, and those remaining have increased their efficiency and have operated at a higher capacity.
The US imports, IIRC, about 5-6% of its gasoline (ie, refined petroleum) and could conceivably import more if more were available. So, there would have to be an international conspiracy, not just a conspiracy of domestic suppliers. Add to that the fact that oil companies (the Exxons and Shells of the world) don’t have a lock on building a refinery-- you or I could build one if we could raise the capital-- and a conspiracy just doesn’t make much sense.
Bit if there’s evidence of a comspiracy, I’m all ears. I think we can assume, though, that environmental regulations and NIMYism is a factor, although it’s hard to say how much of a factor. Considering that Cato doesn’t think it’s the primary cause, it’s hard to imagine that it is. High Pump-Price Fairy Tales:
They seem to think that the capacity problem is:
But they don’t offer a solution to the problem…
Ah damn…I knew someone would be able to figure out what city I lived in if I tossed that out. Ah well.
Why the station on Tramway? Well, my office is on Tramway for one thing…and that new station near the new casino is the cheapest I’ve seen gas…pretty consistantly. Why not Costco or Sam’s? Well, to be honest I never shop at either of those places and didn’t even know they sold gas. :smack: I certainly didn’t know it was cheaper still. I’ll definitely have to look into that.
Not sure why. Could be the quality is not as good I suppose. If they are paying the same taxes as other non-rez stations then the only other thing I could think of is that they are cutting their prices to the bone, selling gas for little profit in the hopes you’ll come in and buy other stuff inside (since you made a special trip there to get gas maybe you’ll buy some lawn furniture or something). As I said, I never shop at either of those places so wasn’t even aware they sold gas at all…even though there is a Sam’s club near Cottonwood mall if IIRC which isn’t too far from where I live.
-XT
Can they afford to buy a bazillion gallons from whoever has the lower price at the time when the other guys are under an obligation to buy from someone else?
I believe they charge a much higher tax over there.
“Scarce” in the economics sense means “finite”, not “shortages”. Prices are going up because there is not enough of a supply to meet the demand at a lower price. It’s not like there is a hard number which is the current demand and I hope I didn’t give you that impression. The crude market is about as close to the Econ 101 supply / demand graph as you are going to get.
The figures I have is that China has increased its oil imports only 4% over what it purchased the year before.
Our new energy bill does not make it desireable for oil companies to build more refineries.
Our present refineries are at full capacity and this aids in great part in keeping the price of oil high.
There is NO incentive for the oil companies to build more refineries and make gasoline more plentiful.
According to that logic, there is NO incentive for anyone to build any new factories to produce any new goods ever. And yet new factories are built. Why is that?
You are comparing apples with oranges…Oil companies produce one main commodity= fuel. Factories produce goods of all kinds. As long as the globe is thirsty for oil…And as long as there is no real worry about alternative fuels being serious competitors of oil companies, what is the need for the oil companies to produce more fuel…If too much refined product becomes available, down go the prices.
As you said earlier, there have been no new refineries built in the US in 30 years. If there is so much money to be made building refineries, why don’t they? I think part of the answer is that they are far too comfortable making the excessive profits that they do, whether or not the nation’s needs are met is unimportant.
This isn’t a law of nature or anything. The US could build a perfectly decent public transportation system, and with the way things are going, one day it will have to. The question is how long are we going to cling to an unsustainable way of life?
Yes, if supply goes up (without additional demand) prices usually go down. But that’s true of all businesses. And I don’t see the apples to oranges comparison. Each factory produces one type of product (or a range of products in a given product family). Oil companies are no different. Gasoline is just one product made from petroleum.
But I’ll tell you what. If you see that the oil companies are conspiring to limit supply and keep prices artificially high, why not exploit that business opportunity yourself? Get some investors together, build a refinery, offer gasoline at slightly below the current price, and make yourself rich. What’s stopping you from doing this? Business opportunities like this don’t just hang out there for very long. There are plenty of smart, greedy people out there who would love to undercut the competition and make a fortune. The only way to prevent that from happening is to get the government on your side and somehow prevent competition from forming in the first place.
Perhaps you should team up with Glenn McGinnis. He’s a 33 year oil industry veteran who is trying to build a new refinery in Arizona.
I’m sure that’s “part” of the problem. Part. If you read the above linked article, it does make the case that profit margins in the refinery business are not very good. But still, it’s a bit misleading to talk of “no new refineries” being built. What is the difference between these two scenarios:
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A new refinery is built giving the us an increase of 2% in output capacity.
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Existing refineries are made more efficient resulting in a 2% increase in capacity.
#2 has been going on continuously. There’s also the problem that it’s very, very expensive to build a new refinery. At least $1B is needed. Still, I find that unconvincing. It cost much more than that to build a new chip plant, and yet new IC factories are announced all the time.
I suspect that when you get to the bottom of it, it’s the comfluence of many factors that is limitting the developement of new refineries in the US:
- complacent oil comapanies
- a cyclical business and low margins that makes refining less attractive to investors.
- Tough environmental regulations
- NIMBYism
But the market for refined petroluem products is a global one, and refineries outside the US can be used to supply the US market. Afterall, when was there a new factory built in the US for the manufacture of Television sets? Perhaps it’s just cheaper and easier to do it elsewhere.