Gasoline + Collusion = Gasollusion

I started buying gasoline in 1991 and ever since that first day at the pump the spread between the different grades of gasoline has been 10 cents per grade. Premium costs 10 cents more than Midgrade, which costs 10 cents more than Regular. It hasn't mattered if Regular is $1.00 per gallon or $4.00 per gallon, just add 10 or 20 cents to it and you will have the price of the other grades. This means that the spread is a fixed cost. The only variable cost is the price of the gasoline derived from the base commodity oil which constantly changes in price.

Now as prices for gasoline are cascading down the spread between the grades has suddenly increased for no apparent reason. At my local Shell station yesterday Regular was selling for $1.659 per gallon, Midgrade for $1.959 and Premium for 2.059 per gallon. So here in 2008, the spread between Regular and Midgrade has magicially increased to 30 cents per gallon while the spread from Midgrade to Premium remains 10 cents per gallon. This is a clear indication of collusion in the gasoline markets in my opinion.

If the spread between the grades was a percentage of the cost then it would naturally increase as prices went up and drop as prices fell. 5% of $1.00 ($.05) is less than 5% of $4.00 ($.20). This is exactly why Oil Companies like Exxon Mobil and Shell have been seeing record profits as oil rose in price. Their profit is a PERCENTAGE of the base commodity, so as it rises in price so does their profit.

For example, if Regular cost $4.00 then Midgrade might cost $4.20 - 5% higher than Regular grade - and Premium might cost $4.40 - 10% higher than Regular. However that is not what has happened over the past 18 years of ups and downs in the gasoline market. The spread has ALWAYS been 10 cents per grade, no matter what the price.

But suddenly in 2008 the exact opposite has happened. As gas prices have fallen the spread between the grades has RISEN!!! There is no logical answer for this except collusion. I have long wondered why gasoline goes up in price 10 cents at a time but only comes down a penny at a time. That does not speak of an efficient, free flowing market, it speaks of price fixing and collusion in the system between retailers and suppliers.

The next time you hear Congress is holding hearings on something stupid like Steroids in Baseball, call your Representative and ask him why Congress never looks into actual important issues. Things like Collusion in the Gasoline Markets, the Effect of Unregulated Hedge Funds on the Financial Market Meltdown and the Fabrication of Evidence for the War in Iraq to name a few.

Mood: Annoyed

It's Ironic: That my neighbors smoke outside so they don't stink up their own house but they stink up my house if I have my windows open.

Random Movie Quote:

"Brenda?" - Mallrats