Oil Prices

honeycookie · Newbie Joined: 14 Jun 2005 Posts: 5

First, I want to thank all of you for your fascinating discussions of economic/investment issues. I've learned more (albeit just enough to be truly dangerous) from you all than from any other source (online or in school) that I've found. You are wonderful teachers.

I have a very basic question.

If a grocery store, for example, increases the price of food already on the shelf in the event of a disaster of some sort, it's considered to be price gouging -- very bad form, a moral issue.

How is it, then, that the gasoline that I buy today which was refined and delivered to the gas station some time ago (and has, in essence, been sitting on the shelf), goes up in price under the same circumstances and there is no similar standard of, well -- behavior/morality?

I would really appreciate any enlightenment you might be able to offer. I've gone 'round and 'round on this one, and can't come up with a reason (but, admittedly, my knowledge is quite limited).

Thanks -- Jan

HenryTo · Posted: Sat Sep 03, 2005 9:48 am Post subject: gasoline station owners

Jan,

Nice to see you posting here! From my limited knowledge of how gasoline stations operate - owners are typically emailed or faxed the prices of what they are supposed to charge each day by their suppliers. That is, gasoline station owners charge based on the replacement cost of their gasoline - not what prices were when the gasoline was shipped to the station. In general, a lot of this is outside of their control - except for the occasional stories you hear about owners charging over $5 a gallon!

A couple of articles that may somewhat explain how gasoline pricing works at the retail level:

http://www.dailytribune.com/stories/090205/loc_20050902001.shtml

http://www.baltimoresun.com/news/nationworld/bal-te.bz.gas01sep01,1,6856227.story?coll=bal-news-nation

Hope this helps.

Henry