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The Silence of the Hams
Why the deafening silence of the University of Chicago's Economics Dept.?
This article explains how "gougeonomics" not "economics" offers a better explanation of economic turmoil than neoclassical economics. Gougeonomic theory explains why bankers are getting huge bonus payouts for destroying the economy, driving us out of work, doubling our credit card rates, repossessing our homes, and refusing to do what they are supposed to be in business to do ... i.e. make loans.
Gougeonomic Theory is also used extensively by UCAN's Big Oil Hog to explain irrational price movements in gasoline and oil markets.
Five years
For five long years the Big Oil Hog has made its annual economic predictions with a dazzling record of 100% accuracy. It even predicted the massive slide in gas prices prior to the 2006 elections, and it did it using a novel new theory of economics called "gougeonomics."
Every February 2, (Ground Hog Day), the infamous Big Oil Hog has appeared to seek out his shadow at Hogger's Knob, San Diego. Once the "Oracle of Pork's" prediction is translated from its native Pig Latin, it means either six months of higher oil and gas prices, or a welcome respite from the tyranny of the oil companies.
Listen up, CNBC, because the Big Oil Hog's predictions are news. Big news. Yet given the Big Oil Hog's astonishing track record, one can't help but wonder about the silence of the University of Chicago. Obviously as a tool of the mainstream media, Good Morning America's annual boycotting of event is utterly predictable. But with a record of accuracy that defies all odds, you would think the Pink Porker of Petroleum's price predictions would garner the attention of the Chicago School.
So again: Why the silence?
Could it be that a wisp of the smoke of academic jealousy has entered the hallowed halls at U of C ?
It's possible. After all, when UCAN makes a prediction on future prices, we do not use classical economics. This is because the "rules of economics" have failed. This is especially true of the neoclassical economics taught at the Chicago School.
After years of study, UCAN has created a new school of economic thinking called "gougeonomics." It is this fundamental understanding of the principles of gougeonomics that allows the Oil Hog to enjoy its record of 100% accuracy in its predictions regarding commodity prices for oil and gasoline. Gougeonomic Theory explains irrational price movements in markets where the prices are rigged or manipulated, such as the New York Mercantile Exchange.
Gougeonomics explained
The biggest difference between a market economy and a gougeonomy are that in a market economy, you have competitors and competition that eventually has an effect on retail prices.
In a gougeonomy, however, the market consists of a naturally evolved oligarchical pricing structure where the price of a commodity or service is determined not by supply and demand, but rather, by "demand and supply" where the oligarchy (or oiligarchy if you prefer), supplies less product and demands more money for it.
The theory of gougeonomics first came into being as a hypothesis during the California Electricity Crisis of 1999-2000 when former monopoly energy suppliers were required to compete under electric deregulation. The fatal flaw of electric deregulation was the idea among regulators that energy companies "Like to compete." This faulty assumption created a marketplace where the suppliers of natural gas and electricity routinely restricted supplies in order to drive up the price.
These energy suppliers learned that by limiting the supply of energy, they could quickly make from ten to twenty times as much profit per unit of energy sold. California was plunged into rolling blackouts because the energy companies were intentionally shutting off power in order to drive up the price. Essentially, the rolling blackouts were in reality "rolling blackmail," caused by an overly consolidated energy industry.
The fatal flaw of free market economists
In retrospect, the theory of gougeonomics, not the neoclassical economics of the Chicago School prevailed. The free marketeers could not accept the idea that energy companies would cooperate instead of compete. Despite mountains of evidence of price-fixing, price manipulation, gouging, and collusion, many still believe, wrongly, that the reason behind the electric crisis was a fundamental shortage of electricity. They believe, wrongly, that the wisdom of the "hidden hand of the marketplace" as espoused by Adam Smith would stabilize dysfunctional markets. It didn't. The shortages and rolling blackouts were created by a dysfunctional market that had a perverse incentive to not compete.
The genesis of the Gougeonomic Theory
Gougeonomic Theory was first developed by UCAN's Oil and Gasoline Analyst, Charles Langley, after watching the manipulation of gasoline prices in Southern California. The theory asserts that in a gougeonomy (i.e. a dysfunctional market) the corporation that supplies the least amount of product at the highest price with the worst customer service will be victorious.
It isn't fair, it isn't pretty, and it isn't just. Nor is it eloquent, but in a gougeonomy, as UCAN's Executive Director Michael Shames explains, "The hidden hand is in the cookie jar." And ultimately, instead of embracing reality, the mainstream economists cling to their dogmatic beliefs that "supply and demand" actually sets oil and gas prices, and that our financial markets will self-regulate through competition. They do not. But saying this out loud is to scream that God is Dead in the Church of Economics, or to declare that the earth is not the center of the universe in the time of Copernicus.
Gougeonomic Theory offers the best explanation for the complete collapse of our banking system
With the recent collapse of the nation's banks and investment houses, and the unprecedented public subsidies of the nation's largest banks, the Theory of Gougeonomics is more relevant than ever.
You may have asked your self these questions:
"Why are banking executives who are proven failures getting paid so well?"
Or, "Why are bankrupt firms, the same companies that deprived me of my life savings, my job, and my home, being rewarded with multi-billion dollar welfare payments from the government?"
Viewed through the myopic lens of the Chicago School, these ugly realities don't make sense. That's because the Chicago School embraces a theory of finance and banking called the "Efficient Market Hypothesis," which, in a nutshell, asserts that financial markets can not be gamed because the market is inherently wise.
Yet if anything proves the failure of the Chicago School, it is the complete meltdown of the global economy.
If the Chicago School's idea of "supply and demand" really did work, then AIG, Goldman Sachs, Morgan Stanley, and JP Morgan would all be out of business. These firms are morally, ethically, and financially bankrupt. What's more, these four institutiions are complete financial and business failures. This is an undisputed fact. Yet in the first quarter of 2010, the top executives at these instutions got record salaries and huge bonus payouts. According to Bloomberg News, the money these executives have made has increased by 60%.
Ordinary economics doesn't explain why these failed losers are being rewarded ... but gougeonomics does.
Gougeonomics explains this phenomona of rewarding failure elegantly. Remember, in a previous paragraph we explain that in a gougeonomy, the market rewards the vendors who supply the least amount of product at the highest price with the worst possible service.
Now look again at who is prospering in this economy. Is it efficient corporations?
No. It is the same bankers who ruined it.
Why? because these bankers are supplying less product at higher prices with horrible service. And because we have a gougeonomy instead of a free market, these failed bankers are prospering.
No wonder the University of Chicago is silent. It could be a victim of gougeonomics, too, where the worst students, with the lowest performance are commanding the highest pay as faculty members.
Enough said.
UPDATE: Toyota recalls 3.8 million Toyota and Lexus vehicles, according to Channel 10 News.
A fatal crash in Santee, California, that killed four people, has prompted Toyota to issue a mandatory inspection alert of all Lexus and Toyota vehicles. The vehicle involved in the accident was a 2009 Lexus ES 350.
Toyota is ordering mandatory inspections of all Toyota and Lexus vehicles after an improperly installed floor mat was linked to a crash that killed four people last month near Santee, California. One of the victims was a California Highway Patrolman, who was driving the vehicle.
A frantic passenger in the car told a dispatcher that the car was traveling at 120 mph and that the accelerator was stuck.
According to an article in the Union-Tribune, Toyota recommends that vehicle owners should check their floor mats to make sure that either the carpet or rubber mat is properly secured and clipped to the floor.
In 2007, Toyota issued a recall for some of its mats due to complaints about the mats slipping forward and trapping the gas pedal.
Consumers may take their vehicles to dealers for inspection and cars will be inspected when brought in for service as well.
"We urge all other automakers, dealers, vehicle owners, and the independent service and car wash industries to assure that any floor mat, whether factory or aftermarket, is correct for the vehicle and properly installed and secured," said officials of Toyota Motor Sales USA in a statement.
A fatal crash in Santee, California, that killed four people, has prompted Toyota to issue a mandatory inspection alert of all Lexus and Toyota vehicles. The vehicle involved in the accident was a 2009 Lexus ES 350.
Toyota is ordering mandatory inspections of all Toyota and Lexus vehicles after an improperly installed floor mat was linked to a crash that killed four people last month near Santee, California. One of the victims was a California Highway Patrolman, who was driving the vehicle.
A frantic passenger in the car told a dispatcher that the car was traveling at 120 mph and that the accelerator was stuck.
According to an article in the Union-Tribune, Toyota recommends that vehicle owners should check their floor mats to make sure that either the carpet or rubber mat is properly secured and clipped to the floor.
In 2007, Toyota issued a recall for some of its mats due to complaints about the mats slipping forward and trapping the gas pedal.
Consumers may take their vehicles to dealers for inspection and cars will be inspected when brought in for service as well.
"We urge all other automakers, dealers, vehicle owners, and the independent service and car wash industries to assure that any floor mat, whether factory or aftermarket, is correct for the vehicle and properly installed and secured," said officials of Toyota Motor Sales USA in a statement.
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Voodoo Economics: Why you should question the free market zombies who say it is all about "supply and demand." |
Beyond "Supply and Demand"
On Saturday, August 9, 2009, the San Diego Union-Tribune's Business Section ran a lead story by Onell Soto about high gas and oil prices. Mr. Soto is a careful reporter and researcher, and his article quoted me as saying " ... the problem is the low supply of surplus gasoline, which drives up prices."
I was quoted accurately, but the statement sounds as though I was saying that gas prices are set by the laws of "Supply and Demand."
News Flash: They aren't. Gas prices are set by Refinery Pricing Managers.
Not only that, but the supply of gasoline that determines these prices can be manipulated.
Zombies should stop reading here
Explaining all this requires an understanding of how the market works and how prices are set, and a willingness to peel back the corners on cherished American dogma. I'll try and do it before your eyes glaze over and you take the easy way out by parroting the mainstream dogma in a zombie-like fashion saying ... it is all about supply and demand ... it is all about supply and demand ... Ayn Rand is a sex goddess ... the hidden hand of the market place is God-like in its wisdom etc.
How prices are manipulated
The industry uses two basic tactics to drive up prices. They are retail price redlining, and control of supply. Once you understand how these two factors work, you can stop drinking the free market Kool-Aid offered up by the oil industry. But the first thing you need to understand is the vital role of unbranded independent gasoline stations.
Unbranded vs. Brand Name gas
There are three types of gas stations: Company-owned gas stations, brand-name gas stations that are owned by a local franchisee, and unbranded gas stations. Company owned stations are vertically integrated (i.e. owned by Shell, supplied by Shell, and managed by Shell).
Branded Independent Dealers are locked into prices set by the refinery.
Branded dealerships are often owned by local business people who tend to be more inclined to discount their gasoline to their customers. A branded dealer typically operates a franchise, similar to a Burger King or McDonald's franchise: He or she agrees to follow certain rules in order to sell gas. It doesn't matter if the station is Shell, Mobil, Chevron, or BP/Arco, if you are selling their gas and displaying their corporate logo you agree to their terms. Perhaps the most important thing a dealer agrees to is that you will pay whatever the refinery decides to charge you for gasoline (see price redlining below).
Unbranded Independent Dealers can shop around for the cheapest gas
Unbranded dealers are not affiliated with any particular brand of gasoline. These "Indies" buy their gasoline from jobbers who purchase gasoline on the spot market. An unbranded dealer can actually shop around for the best price.
Gasoline Price Redlining:
Most people assume that local gas prices are set by the local gasoline retailer. We logically assume that if a gas station is charging 25¢ more per gallon than the same brand a few miles away that it is because the dealer is making an extra 25¢. This isn't true.
The industry exercises powerful control over local gasoline markets by using a type of price redlining called zone pricing. With zone pricing, the refinery sets the price for each dealer depending on the dealer's location. All oil companies do this.
The oil industry says it uses zone pricing to "compete" more effectively, but the reality is that zone pricing has become a powerful tool for controlling the retail price of fuel, for disciplining dealers who price their gasoline too cheaply, and for limiting the damage caused by price wars.
This is why Refinery Pricing Managers set the price of gasoline instead of allowing the free market to do it for them. Brand-name dealers are locked into a specific wholesale price for gasoline - a price that can be arbitrarily changed at a moment's notice by the refinery. In fact, the dealer's only real choice is to RAISE the price of fuel - if he or she cuts the price too much, the refinery will simply step in and raise the wholesale price to that specific dealer.
This process, known as "disciplining the dealer" puts more profit in the refiner's pocket and helps turn the branded dealer into a corporate share-cropper.
The refiners can get away this because the dealer can't shop around for cheaper gasoline. This means the refinery can use its arbitrary prices to prevent price wars and cost-cutting in specific areas. As long as the competition is civil, prices (and oil company profits) will remain high.
In the oil business, everybody hates a cost-cutter. One of the ways the industry punishes cost-cutters is by "zoning" the price of gasoline more cheaply to stations that are located near a cost-cutter. In fact, refiners will underprice gasoline in areas where there are cost-cutters and subsidize this activity by overpricing it in areas where competition has been successfully removed, or "tamed."
So who are these cost-cutting heroes? It isn't Arco, which generally offers the cheapest name-brand gasoline in California. And thanks to zone pricing, it isn't always the brand-name stations. It is the "unbranded independents" and many are more aggressive in their pricing than Arco.
Why Unbranded Independent gas stations are the only real competitors
The most competitive dealers are Unbranded Independents. Unbranded dealers buy surplus gasoline (usually from a jobber) and pass the savings on to you. It is that simple ... and also where things get complicated, because these dealers live or die based on the spot price of gasoline.
About 90% of the time, in about 90% of all California markets, the price of gasoline at unbranded stations sets the pace and the price of gasoline in their trade areas.
Unbranded gas stations tend to charge 10 to 15 cents less per gallon than the major brands. Our research shows that one unbranded gasoline station can depress gasoline prices for a five mile radius.
This is because the major brands are forced to "zone" their gas at cheaper prices to stations that are close to an unbranded independent.
The fact is, that communities with unbranded gas stations pay less for their gasoline. In these communities, the primary competition to the unbranded stations is Arco. The reason for this is that the majority of unbranded stations (and 100% of all Arco stations) only accept cash or debit card payments.
That's why we have referred to Arco, not as a "low-price leader," but rather as a "high price enabler."
Arco, by default, maintains the price floor for gasoline in California.
Most unbranded dealers have learned that if they price their gasoline more than two cents below the price charged by the nearest Arco, that they risk being "disciplined" as described above. Even retail giants like Costco have learned not to undercut the nearest Arco by more than a few pennies.
The role of the Spot Market in controlling supply
Gasoline refining is a volume business with huge startup costs. For this reason, the last barrel of gas a refiner produces is the cheapest barrel - at least in terms of manufacturing costs. As a result, the major refineries tend to produce surplus gasoline in order to make sure that they can supply enough gas to their local dealers.
This surplus gas often finds its way onto the spot market, where other companies can buy their gasoline for cash "on the spot." Local jobbers and dealers will buy this gasoline and sell it at a discount through unbranded outlets.
In a time of surplus, everybody wins .... except for the refineries. For them, selling fuel on the spot market is a little like a farmer growing his own crows. That's why refiners prefer to NOT sell their excess gasoline on the spot market, because the gasoline is purchased by cost-cutters. And in the oil business, nobody likes a cost-cutter.
Arco, for example, has a long history of shipping gasoline to Japan at a loss in order to keep the price high on the West Coast.
In a sense, the Los Angeles Spot market serves as a strategic reserve for the industry - when a refinery has a problem and can't produce gasoline, it will buy gasoline at the spot price on the spot market from its colleagues at other refineries (note that I used the word "colleagues" not "competitors").
At the refinery level, the competition for market share between colleagues is civil; not unlike the gentlemanly elbowing of guests at the Sunday after-church crab and lobster buffet.
Sometimes, the refineries avoid dumping their gas on the spot market.
Proof that Refiners prefer cooperation over competition.
In the case of Chevron and British Petroleum/Arco the two companies actually enjoy a pleasant and mutually beneficial trading relationship. Remember the classic Grey Poupon Mustard commercial where the passenger of a 1958 Rolls Royce Silver Princess pulls up to another Rolls Royce and says "Do you happen to have any Grey Poupon?" Well, that's pretty much how the refiners treat each other when they run out of gasoline.
Obviously, with these sorts of supply trading agreements, the wholesale market can't be very competitive.
It is a little like Burger King asking McDonald's to give up some of its beef because Burger King had a splash of the Mad Cow, thank you.
Remember, the strategy is to keep a tight control over the supply of gasoline. By trading with its alleged competitors, a refiner keeps excess gasoline from reaching the spot market, thereby starving the independent dealers.
In the unlikely event a refinery can't buy more gasoline from one of its industry chums, it shops the spot market and buys up every barrel it can get its hands on, creating shortages (and FEAR of shortages) which drive prices and profits up.
Both of these factors can drive the price of spot gas up to a level where the unbranded stations can not buy gas at a competitive price.
This raises the price floor by eliminating the only real competitors left in the marketplace.
Fixing Price Manipulation
So how do you fix the problem of price manipulation? Here are five ways:
First: Lawmakers must outlaw price-redlining and zone pricing.
Second: Break up the vertically integrated oil industry.
Third: Ban trading agreements between competitors.
Fourth: I nspect refineries for safety, and to make certain they are not intentionally shutting down capacity to scare prices higher.
Fifth: Break up the "oiligarchy." In 1910, Teddy Roosevelt broke up the Standard Oil Trust. Now, 100 years later, we need to do it again.
Supply and Demand
A market economy can work, but the laws of Supply and Demand won't work until the oil industry is forced to compete like any other business. An undtil that happens, we'll keep paying through the hose.
|
|
Voodoo Economics: Why you should question the free market zombies who say it is all about "supply and demand." |
Beyond "Supply and Demand"
On Saturday, August 9, 2009, the San Diego Union-Tribune's Business Section ran a lead story by Onell Soto about high gas and oil prices. Mr. Soto is a careful reporter and researcher, and his article quoted me as saying " ... the problem is the low supply of surplus gasoline, which drives up prices."
I was quoted accurately, but the statement sounds as though I was saying that gas prices are set by the laws of "Supply and Demand."
News Flash: They aren't. Gas prices are set by Refinery Pricing Managers.
Not only that, but the supply of gasoline that determines these prices can be manipulated.
Zombies should stop reading here
Explaining all this requires an understanding of how the market works and how prices are set, and a willingness to peel back the corners on cherished American dogma. I'll try and do it before your eyes glaze over and you take the easy way out by parroting the mainstream dogma in a zombie-like fashion saying ... it is all about supply and demand ... it is all about supply and demand ... Ayn Rand is a sex goddess ... the hidden hand of the market place is God-like in its wisdom etc.
How prices are manipulated
The industry uses two basic tactics to drive up prices. They are retail price redlining, and control of supply. Once you understand how these two factors work, you can stop drinking the free market Kool-Aid offered up by the oil industry. But the first thing you need to understand is the vital role of unbranded independent gasoline stations.
Unbranded vs. Brand Name gas
There are three types of gas stations: Company-owned gas stations, brand-name gas stations that are owned by a local franchisee, and unbranded gas stations. Company owned stations are vertically integrated (i.e. owned by Shell, supplied by Shell, and managed by Shell).
Branded Independent Dealers are locked into prices set by the refinery.
Branded dealerships are often owned by local business people who tend to be more inclined to discount their gasoline to their customers. A branded dealer typically operates a franchise, similar to a Burger King or McDonald's franchise: He or she agrees to follow certain rules in order to sell gas. It doesn't matter if the station is Shell, Mobil, Chevron, or BP/Arco, if you are selling their gas and displaying their corporate logo you agree to their terms. Perhaps the most important thing a dealer agrees to is that you will pay whatever the refinery decides to charge you for gasoline (see price redlining below).
Unbranded Independent Dealers can shop around for the cheapest gas
Unbranded dealers are not affiliated with any particular brand of gasoline. These "Indies" buy their gasoline from jobbers who purchase gasoline on the spot market. An unbranded dealer can actually shop around for the best price.
Gasoline Price Redlining:
Most people assume that local gas prices are set by the local gasoline retailer. We logically assume that if a gas station is charging 25¢ more per gallon than the same brand a few miles away that it is because the dealer is making an extra 25¢. This isn't true.
The industry exercises powerful control over local gasoline markets by using a type of price redlining called zone pricing. With zone pricing, the refinery sets the price for each dealer depending on the dealer's location. All oil companies do this.
The oil industry says it uses zone pricing to "compete" more effectively, but the reality is that zone pricing has become a powerful tool for controlling the retail price of fuel, for disciplining dealers who price their gasoline too cheaply, and for limiting the damage caused by price wars.
This is why Refinery Pricing Managers set the price of gasoline instead of allowing the free market to do it for them. Brand-name dealers are locked into a specific wholesale price for gasoline - a price that can be arbitrarily changed at a moment's notice by the refinery. In fact, the dealer's only real choice is to RAISE the price of fuel - if he or she cuts the price too much, the refinery will simply step in and raise the wholesale price to that specific dealer.
This process, known as "disciplining the dealer" puts more profit in the refiner's pocket and helps turn the branded dealer into a corporate share-cropper.
The refiners can get away this because the dealer can't shop around for cheaper gasoline. This means the refinery can use its arbitrary prices to prevent price wars and cost-cutting in specific areas. As long as the competition is civil, prices (and oil company profits) will remain high.
In the oil business, everybody hates a cost-cutter. One of the ways the industry punishes cost-cutters is by "zoning" the price of gasoline more cheaply to stations that are located near a cost-cutter. In fact, refiners will underprice gasoline in areas where there are cost-cutters and subsidize this activity by overpricing it in areas where competition has been successfully removed, or "tamed."
So who are these cost-cutting heroes? It isn't Arco, which generally offers the cheapest name-brand gasoline in California. And thanks to zone pricing, it isn't always the brand-name stations. It is the "unbranded independents" and many are more aggressive in their pricing than Arco.
Why Unbranded Independent gas stations are the only real competitors
The most competitive dealers are Unbranded Independents. Unbranded dealers buy surplus gasoline (usually from a jobber) and pass the savings on to you. It is that simple ... and also where things get complicated, because these dealers live or die based on the spot price of gasoline.
About 90% of the time, in about 90% of all California markets, the price of gasoline at unbranded stations sets the pace and the price of gasoline in their trade areas.
Unbranded gas stations tend to charge 10 to 15 cents less per gallon than the major brands. Our research shows that one unbranded gasoline station can depress gasoline prices for a five mile radius.
This is because the major brands are forced to "zone" their gas at cheaper prices to stations that are close to an unbranded independent.
The fact is, that communities with unbranded gas stations pay less for their gasoline. In these communities, the primary competition to the unbranded stations is Arco. The reason for this is that the majority of unbranded stations (and 100% of all Arco stations) only accept cash or debit card payments.
That's why we have referred to Arco, not as a "low-price leader," but rather as a "high price enabler."
Arco, by default, maintains the price floor for gasoline in California.
Most unbranded dealers have learned that if they price their gasoline more than two cents below the price charged by the nearest Arco, that they risk being "disciplined" as described above. Even retail giants like Costco have learned not to undercut the nearest Arco by more than a few pennies.
The role of the Spot Market in controlling supply
Gasoline refining is a volume business with huge startup costs. For this reason, the last barrel of gas a refiner produces is the cheapest barrel - at least in terms of manufacturing costs. As a result, the major refineries tend to produce surplus gasoline in order to make sure that they can supply enough gas to their local dealers.
This surplus gas often finds its way onto the spot market, where other companies can buy their gasoline for cash "on the spot." Local jobbers and dealers will buy this gasoline and sell it at a discount through unbranded outlets.
In a time of surplus, everybody wins .... except for the refineries. For them, selling fuel on the spot market is a little like a farmer growing his own crows. That's why refiners prefer to NOT sell their excess gasoline on the spot market, because the gasoline is purchased by cost-cutters. And in the oil business, nobody likes a cost-cutter.
Arco, for example, has a long history of shipping gasoline to Japan at a loss in order to keep the price high on the West Coast.
In a sense, the Los Angeles Spot market serves as a strategic reserve for the industry - when a refinery has a problem and can't produce gasoline, it will buy gasoline at the spot price on the spot market from its colleagues at other refineries (note that I used the word "colleagues" not "competitors").
At the refinery level, the competition for market share between colleagues is civil; not unlike the gentlemanly elbowing of guests at the Sunday after-church crab and lobster buffet.
Sometimes, the refineries avoid dumping their gas on the spot market.
Proof that Refiners prefer cooperation over competition.
In the case of Chevron and British Petroleum/Arco the two companies actually enjoy a pleasant and mutually beneficial trading relationship. Remember the classic Grey Poupon Mustard commercial where the passenger of a 1958 Rolls Royce Silver Princess pulls up to another Rolls Royce and says "Do you happen to have any Grey Poupon?" Well, that's pretty much how the refiners treat each other when they run out of gasoline.
Obviously, with these sorts of supply trading agreements, the wholesale market can't be very competitive.
It is a little like Burger King asking McDonald's to give up some of its beef because Burger King had a splash of the Mad Cow, thank you.
Remember, the strategy is to keep a tight control over the supply of gasoline. By trading with its alleged competitors, a refiner keeps excess gasoline from reaching the spot market, thereby starving the independent dealers.
In the unlikely event a refinery can't buy more gasoline from one of its industry chums, it shops the spot market and buys up every barrel it can get its hands on, creating shortages (and FEAR of shortages) which drive prices and profits up.
Both of these factors can drive the price of spot gas up to a level where the unbranded stations can not buy gas at a competitive price.
This raises the price floor by eliminating the only real competitors left in the marketplace.
Fixing Price Manipulation
So how do you fix the problem of price manipulation? Here are five ways:
First: Lawmakers must outlaw price-redlining and zone pricing.
Second: Break up the vertically integrated oil industry.
Third: Ban trading agreements between competitors.
Fourth: I nspect refineries for safety, and to make certain they are not intentionally shutting down capacity to scare prices higher.
Fifth: Break up the "oiligarchy." In 1910, Teddy Roosevelt broke up the Standard Oil Trust. Now, 100 years later, we need to do it again.
Supply and Demand
A market economy can work, but the laws of Supply and Demand won't work until the oil industry is forced to compete like any other business. An undtil that happens, we'll keep paying through the hose.
In what is perhaps the most exciting energy development of 2009, UCSD is coordinating a multi-agency effort to develop substitutes for gasoline, diesel and ethanol at a cost of as little as $2 a gallon. In fact, this research is so powerful - so exciting - and so deserving of your support that I'm reluctant to write another word about this. JUST GO THERE NOW. In terms of national security, global wealth, and historical importance, this urgent research may be the most important scientific effort since the Manhattan Project ... and it all revolves around using San Diego's sunshine and abundantly available brackish water supplies to grow algae -- one of the most basic life forms on the planet. Best of all, Algae is literally a "green" fuel that does far less damage to the environment than hydrocarbons derived from oil or coal.
If you are concerned about breaking America's growing dependency on environmentally toxic imported oil from countries that loathe us, then VISIT SD-CAB, the San Diego Center for Algae Biotechnology, NOW.
In what is perhaps the most exciting energy development of 2009, UCSD is coordinating a multi-agency effort to develop substitutes for gasoline, diesel and ethanol at a cost of as little as $2 a gallon. In fact, this research is so powerful - so exciting - and so deserving of your support that I'm reluctant to write another word about this. JUST GO THERE NOW. In terms of national security, global wealth, and historical importance, this urgent research may be the most important scientific effort since the Manhattan Project ... and it all revolves around using San Diego's sunshine and abundantly available brackish water supplies to grow algae -- one of the most basic life forms on the planet. Best of all, Algae is literally a "green" fuel that does far less damage to the environment than hydrocarbons derived from oil or coal.
If you are concerned about breaking America's growing dependency on environmentally toxic imported oil from countries that loathe us, then VISIT SD-CAB, the San Diego Center for Algae Biotechnology, NOW.
No Longer "aFORDable." Detroit's first darling is learning the hard way what it means to be fuelish. Businessweek is reporting that Ford engineers are looking at old technology as a panacea for their gas-guzzling, money-losing woes. And just to throw fuel on the fire, it has admitted that most of the "new technologies" that it has been evaluating aren't new at all - most have have been around for at least half a century or more ... Details at UCAN's Gas Project at www.fueltracker.com.
No Longer "aFORDable." Detroit's first darling is learning the hard way what it means to be fuelish. Businessweek is reporting that Ford engineers are looking at old technology as a panacea for their gas-guzzling, money-losing woes. And just to throw fuel on the fire, it has admitted that most of the "new technologies" that it has been evaluating aren't new at all - most have have been around for at least half a century or more ... Details at UCAN's Gas Project at www.fueltracker.com.
No Longer "aFORDable." Detroit's first darling is learning the hard way what it means to be fuelish. Businessweek is reporting that Ford engineers are looking at old technology as a panacea for their gas-guzzling, money-losing woes. And just to throw fuel on the fire, it has admitted that most of the "new technologies" that it has been evaluating aren't new at all - most have have been around for at least half a century or more ... Details at UCAN's Gas Project at www.fueltracker.com.
Utility Consumers' Action Network
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UCAN.org is made available by the Utility Consumers' Action Network to assist you in becoming what you always knew you could be, a consumer ROCK STAR! We take no corporate money, and are beholden only to you, the consumer. As such, the site is here for educational, advocacy, and empowerment purposes, as well to to give you general information and a general understanding of the law. Just remember this site is NOT here to provide specific legal advice. By using this web site you of course understand that there is no attorney client relationship between you and the Web Site publisher, UCAN. The Web Site should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.
That said, get to digging on the site, inform yourself, speak your mind, and earn Watchdog Bones! This is YOUR site, and we mean it. So comment on any of the content, discuss the latest issues in the forums, file a complaint on a company with the fraud squad, and generally cut loose.
See our Terms of Use, Privacy, and Copyright complaint policies as well as our Content Reuse Policy, Some Rights Reserved.
UCAN's affiliate New Media Rights has created a series of investigative reporting videos based on your consumer stories. Check out the new and easily searchable Guides page!
How to protect your own blog or website from liability for user generated content
Is Youtube putting advertisements on user videos without permission?
Essential free and open software toolkit for consumers
How to find free music, images, and video you can use or remix in your own creative works
How to Listen to Music on the Internet for Free...Legally
How to make a Podcast... for free
Visit NewMediaRights.org
We are currently looking for blog posts from both attorneys and consumers. If you would like your work published on a site with thousands of daily visits, send a submission to tips@ucan.org.
Get personal assistance with your consumer complaint about a company by using our Online Complaint Forms. Or, call the Fraud Squad Hotline at (619) 696-6966!
Don't buy a cell phone without our Mobile Phone Plan Checker!
Register to get it FREE right now!
What are you packin? Is it anything like UCAN's new and improved Consumer Complaint Directory? If not, you should really pick up a copy. This thing is chock-full of hard-hitting consumer punch.
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