One of the great things about what I do for a living, political consulting and public relations for elected officials, is I get to come into contact with so many experts on a variety of issues.  Yesterday I had a meeting with some of the top energy analysts and economists for the State of New York, the issue was gas prices and what the State could do to ease the pressure on the consumer.  I won't go into the proposals here, would not be appropriate and no decision has been made anyway.  I do wish to share the analysis of several of the people who follow this for a living.

Price Gouging IS going on... these are not regular market forces at play.  There is an oligapoly that for all intent and purposes is acting as a monopoly.  The amount of refined product in inventory is more than enough to meet immediate demands for at least four weeks.  The easing of environmental rules to do aay with boutique gas formulations means refineries can focus on one blend of gasoline.  The announcement of release from the strategic petroleum reserves means the refineries that are operational know that they will have an uniterrupted supply of crude oil, so drop off of gulf region production should not be an issue.  While regional spikes in price should be anticipated, they should not be national.  There is simply no reason for states WITH refining capacity such as New Jersey to be seeing the spikes that they are, nor should the immediate surrounding states.

What we are seeing in New York is one of the Big 4 controlling approximately 50% of all inventory in the state, both through their own retailers as well as independents who buy from them.  They sell to the independents at the pump price they sell to the consumer at their franchises... thus forcing the independent to sell for twenty to twenty five cents a gallon more to remain in business.  When anybody criticizes the supplier's price, they simply point to everyone else and say give us a break, we're cheaper than our competition, we're doing the consumer a favor!  There is price fixing going on, they are gouging the consumers, and there is little that the states can do.  Yes, the states can cut the taxes they impose on refined petroleum products, but there is no guarantee that the savings would be passed on to the consumer and not into the pockets of the companies that are already profiteering.  You can attempt price controls, but this is pretty universally accepted as a bad idea, by me included.  You can cut back on usage, but the fact remains you can only cut back so much, and a very large part of our economy is dependent upon transit and shipping.

What's really needed in my opinion, and my opinion only, is the government needs to break up some of these conglomerates that have a stranglehold on the economy.  Phone service improved and got cheaper when competition was introduced through the break up of Ma Bell.  Similarly, electricity prices have fallen in areas that allow competition between providers.  Instead of allowing mergers like Exxon-Mobil, they need to break these companies up and not allow them to get too much market share.  Unlike many other businesses, it is simply not possible to say I can enter the market and provide an equal or superior product for less.  The cost of entering the market place is too prohibitive, either due to lack of additional refining capacity, the inability to build new refineries, import rules against bringing in refined product from overseas.  As it stands now the market is not working because there is for all purposes a monopoly.

Anyway, just some thoughts and observations from people who know far more about this than I do, and likely just about everybody else on the board does as well.  Yes, there are economic theories on the market place, and there are economic realities.  In this case the two don;t seem to play well together.

Exactly how am I supposed to link a meeting?  As for my credentials, it is pretty well known by many people on this board what I do for a living and who I work for.  No, I am not going to blab it all over cyberspace.  Suffice it to say if you have doubts, feel free to ask some of the NY crew, in particular the New York based site staff who I know in real life and have helped with certain issues they have had navigating NY's often times cumbersome bureaucracy, if I'm full of shit or not.

Well gouging is in many ways a subjective judgement...  I would say when you are priced at $2.57 in the morning and are $3.19 in the afternoon, and you have not taken delivery of a new shipment of gasoline... you are probably gouging.  Yes, your next delivery may cost more... than again, the one after might cost less... will you as a station owner charge less than the delivery charge you just paid for the current shipment?

Seems to me that charging per gallon based upon what you think you will next pay is poor busines management on the dealer's part.  What they are saying is they have no cash flow to cover a shipment and wait a few days to recover their purchase price, so they need to spike prices in anticipation of what might happen.  When the price suddenly drops, you can rest assured they will not drop the price enough to give back their windfall.  The problem is compounded when station B sees station A charging a higher price and figures they can too... afterall, where are you going to go?  It doesn't take a whole lot of effort to see what is going on, they are charging as much as they think they can get away with knowing that gas consumption is fairly inelastic... you can only cut back so much.

If there were greater competition than the Big 4, you can damn well believe you would have lower prices.  That is the basic economic principle you should be focusing on, the lack of competition, the barriers to entry of competition that create a monopolastic effect that hurts consumers.

Not a single gas station in Albany with lines or out of gas...  I can understand prices spiking if there is a true shortage, that is a supply and demand issue.  In the capital region there is plenty of supply, no increased demand and skyrocketing prices.

Quoted: We will never see prices below $3/gal ever again

2.95 just down the road from me, was 3.05 yesterday