I'm a pretty loyal listener to Neal Boortz on the AM dial. He's a sharp guy. Most of the time.
He was opining the other day that gasoline station "gouging" rarely if ever goes on. He said that in every incidence of reported gouging, the Feds determined that no laws had been violated.
While there are laws against price gouging, it is nearly impossible to clearly define what it is. That's why stations tend to get away with doing it.
Here is basically what happens when word comes downs that supplies of gasoline are going to be short.
On the "corners of 4th and Main," you have three stations: Station A, station B, and station C. Whether they are branded gasolines or unbranded, or a combination of both is for the most part immaterial.
The pump price on the morning of the "word" coming down is 2.40 cents per gallon.
Station A checks the inventory that morning and finds 16,000 gallons in the tanks. Enough for three to five days of "normal" sales.
Station B checks its inventory and finds about the same thing.
But Station C has less than 4500 gallons in the unleaded tank. They'll need a delivery by the end of that day, or certainly by noon the next day to be certain of not running out.
Station C orders a load of fuel from the carrier they generally use. The carrier informs them that demand is high, and they'll get to them as soon as they can--if supplies are available.
Station C begins to worry.
Meanwhile, the Communist News Network (CNN) is reporting that gasoline could reach ump-teen dollars a gallon by week's end. Out come the lawn mower gas cans and the lines begin to form. People are not only worried about ten dollar a gallon gas, but are also worried that they won't be able to get gasoline to make it to work by early next week.
Station C sees the lines, and notices that their inventory has dropped to 3,500 gallons in the last two hours. They've sold 500 gallons per hour over the last two hours, and it becomes imminent that they are going to run out of unleaded gas before either of their competitors (Station A and B).
So station C decides to quell the tide a bit with a twenty cent price increase. It's perfectly legal to do this--no laws are being broken. Station C wants to profit as much from their remaining 3,500 gallons as possible, and hopefully slow sales down enough that they don't run out of fuel. The twenty cent increase cuts sales to 200 gallons per hour because...
The droves begin flowing to station A and B. Now their tanks are dropping to the tune of 750 to 800 gallons per hour and they begin to wonder how long inventories will hold. They too have learned that it might be a few days before they get a delivery.
Station A (having no idea how much fuel station C has on hand) decides that they aren't going to be the first station to run out of gas, so they match station C's price--twenty cents high.
Station B gets hammered (naturally) and within the hour also raises its price to the same $2.60 level.
This annoys station C. Now they are selling 350 gallons per hour, rather than 200. Something has to be done. Out come the long handled suction cups and up go the numbers: 2.85 cents ought to do it.
Station A and B are quick to notice this. People are still lined up with the gas cans. Takers abound at two dollars and sixty cents. Station B by this time has seen the morning's 16,000 gallon inventory dwindle to only 9,500 gallons. So 2.85 it is.
Station A sees the fellow at station B crossing the parking lot with the suction cup and numbers. "We're going to 2.85," he tells his chief number changer. "Get the sign changed while I punch in the changes."
This little routine may repeat itself several times. Before we know it, pump prices at this corner are 4.25 cents and the Feds have been called.
And the Feds come in (well, maybe they do). They question the managers at each station. They conclude that station C began the price jumps simply as a means to prevent running out of fuel before their competition did. Sounds reasonable, and in truth, it is reasonable. All subsequent actions by the stations are deemed acceptable and merely reactionary, and not against the law.
And this, folks, is why stations are rarely found guilty of price gouging. There are currently no guidelines on how much a station can bump up the margin of the fuel they are selling.
Wherever inventories are limited, or rumored to be limited, there won't be much if anything the Feds can do to prove gouging at the pumps.
Does this suck? You bet it does.
I believe that some guidelines which station operators must go by need to be implemented. That sounds odd coming from this "less is better where government is concerned" kind of guy--but we've seen the above mentioned scenario played out too many times--to the detriment of our checkbooks and credit cards--for no action to be taken.
In my opinion, if station C is misfortunate enough that they have very little inventory ahead of the shortage, then so be it. That'll be the way the cookie crumbles. They'll be told that a ten percent increase inside of a 24 hour period is the limit, and anything beyond that will result in a hefty fine. Chances are that station C was gambling that prices were going to drop and therefore holding off on that order anyway. So it could be their own fault.
Ten percent in 24 hours is max--unless you have a Bill of Lading showing that you have made a purchase in that time period. In this case it would be fair to price your fuel commensurately.
Dan
He was opining the other day that gasoline station "gouging" rarely if ever goes on. He said that in every incidence of reported gouging, the Feds determined that no laws had been violated.
While there are laws against price gouging, it is nearly impossible to clearly define what it is. That's why stations tend to get away with doing it.
Here is basically what happens when word comes downs that supplies of gasoline are going to be short.
On the "corners of 4th and Main," you have three stations: Station A, station B, and station C. Whether they are branded gasolines or unbranded, or a combination of both is for the most part immaterial.
The pump price on the morning of the "word" coming down is 2.40 cents per gallon.
Station A checks the inventory that morning and finds 16,000 gallons in the tanks. Enough for three to five days of "normal" sales.
Station B checks its inventory and finds about the same thing.
But Station C has less than 4500 gallons in the unleaded tank. They'll need a delivery by the end of that day, or certainly by noon the next day to be certain of not running out.
Station C orders a load of fuel from the carrier they generally use. The carrier informs them that demand is high, and they'll get to them as soon as they can--if supplies are available.
Station C begins to worry.
Meanwhile, the Communist News Network (CNN) is reporting that gasoline could reach ump-teen dollars a gallon by week's end. Out come the lawn mower gas cans and the lines begin to form. People are not only worried about ten dollar a gallon gas, but are also worried that they won't be able to get gasoline to make it to work by early next week.
Station C sees the lines, and notices that their inventory has dropped to 3,500 gallons in the last two hours. They've sold 500 gallons per hour over the last two hours, and it becomes imminent that they are going to run out of unleaded gas before either of their competitors (Station A and B).
So station C decides to quell the tide a bit with a twenty cent price increase. It's perfectly legal to do this--no laws are being broken. Station C wants to profit as much from their remaining 3,500 gallons as possible, and hopefully slow sales down enough that they don't run out of fuel. The twenty cent increase cuts sales to 200 gallons per hour because...
The droves begin flowing to station A and B. Now their tanks are dropping to the tune of 750 to 800 gallons per hour and they begin to wonder how long inventories will hold. They too have learned that it might be a few days before they get a delivery.
Station A (having no idea how much fuel station C has on hand) decides that they aren't going to be the first station to run out of gas, so they match station C's price--twenty cents high.
Station B gets hammered (naturally) and within the hour also raises its price to the same $2.60 level.
This annoys station C. Now they are selling 350 gallons per hour, rather than 200. Something has to be done. Out come the long handled suction cups and up go the numbers: 2.85 cents ought to do it.
Station A and B are quick to notice this. People are still lined up with the gas cans. Takers abound at two dollars and sixty cents. Station B by this time has seen the morning's 16,000 gallon inventory dwindle to only 9,500 gallons. So 2.85 it is.
Station A sees the fellow at station B crossing the parking lot with the suction cup and numbers. "We're going to 2.85," he tells his chief number changer. "Get the sign changed while I punch in the changes."
This little routine may repeat itself several times. Before we know it, pump prices at this corner are 4.25 cents and the Feds have been called.
And the Feds come in (well, maybe they do). They question the managers at each station. They conclude that station C began the price jumps simply as a means to prevent running out of fuel before their competition did. Sounds reasonable, and in truth, it is reasonable. All subsequent actions by the stations are deemed acceptable and merely reactionary, and not against the law.
And this, folks, is why stations are rarely found guilty of price gouging. There are currently no guidelines on how much a station can bump up the margin of the fuel they are selling.
Wherever inventories are limited, or rumored to be limited, there won't be much if anything the Feds can do to prove gouging at the pumps.
Does this suck? You bet it does.
I believe that some guidelines which station operators must go by need to be implemented. That sounds odd coming from this "less is better where government is concerned" kind of guy--but we've seen the above mentioned scenario played out too many times--to the detriment of our checkbooks and credit cards--for no action to be taken.
In my opinion, if station C is misfortunate enough that they have very little inventory ahead of the shortage, then so be it. That'll be the way the cookie crumbles. They'll be told that a ten percent increase inside of a 24 hour period is the limit, and anything beyond that will result in a hefty fine. Chances are that station C was gambling that prices were going to drop and therefore holding off on that order anyway. So it could be their own fault.
Ten percent in 24 hours is max--unless you have a Bill of Lading showing that you have made a purchase in that time period. In this case it would be fair to price your fuel commensurately.
Dan
