From Deseret News archives:
Blame game: Just who is the oil-price villain, anyway?
Competition or collusion?
Motorists often complain that gas stations seem to raise and lower prices together as if in collusion. Gas stations insist that no collusion exists, and in fact that price movement is because of fierce competition.
Hill said about 68 gas station chains exist in Utah, and they and independents operate about 900 individual retail locations. "There is a lot of competition on the street with, for example, Maverick, Costco, Smith's and Holiday keeping down the price as low as possible for the consumer."
Senate investigators said prices tend to go up and down together because most stations try to keep prices at a constant cost differential with one or more competitors. Refiners also do the same in competition with each other.
Senate investigators wrote, "Oil companies and station operators typically will survey the retail prices of nearby gasoline stations at least once a day" to come up with a balance that will help prevent losing too much business to lower-priced competitors or being overrun if their own prices are too low.
Scott Reed, an assistant Utah attorney general, said the state has never found any collusion between competitors or antitrust violations, and no pricing irregularities that could not be explained by normal, legal pricing pressures and practices.
He said the state had never researched price gouging because it was not against any law until last year, when the Legislature passed a law (after possible gouging in southern Utah after flooding) prohibiting vendors from raising prices more than 10 percent above the average price during the previous 30 days during declared emergencies.
Also, Utah law bans stations from selling gasoline below cost to attract business for other items or to hurt competitors. That law is designed to prevent large chains from forcing others out of business to reduce competition. Utah law allows a station to sell below cost only to respond to a competitor who is managing to sell for less.
Seasonal hikes
Every Memorial Day and every summer prices rise as more motorists hit the road. Why?
"Our industry, like all industries, is based on supply and demand," Peacock says. "Demand always goes up in the spring. People drive more and are more active. That drives up the cost because supplies are restricted."
Comments
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73
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