Katrina question

[Tom Miller]

highly

There was a large disparity between gasoline futures and crude futures last week. It's a 12% difference. That's a lot.

[TURTLE]

this is Turtle.

Dave , When the hurrican hit , everyday after it hit, and then was ask if the city and State of Louisiana wanted Federal Aide and FEMA to come in and start the help. Bush and FEMA was told last Friday [2 days ago] that it was ok to have aide and FEMA come in to Louisiana. Governor and Mayor would not give permission for FEMA or Federal Aid at all to come in and almost a week later they decide to give FEMA and Federal Aide a ok to come in. It is against federal law for FEMA or Federal Aide to come into a state with out the Govenor's permission and the Mayor also to go into the city. I have lived in Louisiana all my life and watch the bull grow over the years. All the Rep. and Sentors of the state have a way of dealing with a problem and if you can't deal with it you just turn your back and it will go away. This is what they thought about this New Orleans Hurrican problem. Right now the Governor will say awwwwwww What's the problem -- I bought my Duck hunting Stamp this year and the Mayor is Just plain mad and will not talk about it. We have a real crew to deal with this.

OH Yea, there was a 5 foot shark that had gotten in to the French Quarter and on Canal Street. i did not hear about what happen but somebody maybe having Shark for supper.

TURTLE

[Edwin Pawlowski]

A local independedant station was told to raise prices and they did. Two hours later they were told to raise them again, but did not want to as they wanted to take care of their loyal customers. Simply put, if you ever want to get gas again, raise the price.

[Duane Bozarth]

That's one possible explanation I had...

There have been instances here of distribtors threatening to stop delivering on the basis of not enough volume, but none have threatened anything on retailers' pricing that I am aware of. Doesn't really make any sense they would do so as the only effect to them would be to move more, not less, product and their take is the same...

I know at the local Co-op we tend to wait longer on the driveway pumps than most of the independents simply because we have larger total intermediary storage than they (we are, in essence, our own sub-distributor rather than getting direct retail distribution) so we can delay the pinch a little w/ only a cash flow deficit but we elect to do that since we don't do cash pump sales, only keyed members. If we ran cash pumps, I'm sure we would treat those like any of the others and reflect cost increases at the time.

The other possible explanation I had was that the fella' just doesn't like having to tell folks he deals with regularly the bad new so he shifts the blame, so to speak...

Even if we still had the Farmland refinery, it would be costing us at least as much as it does now because there's not enough KS crude being produced to run it a full capacity any longer. Having to buy crude and truck it in to refine would be even more expensive than buying bulk on the market. Which is, of course, why we shut the refinery down several years ago.

That, btw, has been a pretty common occurrence w/ these small refineries throughout the midwest and is a factor in the loss of refining capacity in the US the media has been talking about.

[Duane Bozarth]

I was speaking of a short term "loss" and not, in actuality a loss at all--the implication was this retailer wished to countinue selling existing inventory at less than new replacement cost and that was forbidden him by his wholesaler. As noted in a reply to Edwin, that doesn't really make sense and I've not heard of it, at least here.

Second, regarding "loss leader" laws--I don't know FL's specific provisions, I doubt the law would prohibit short term sales such as this and most have allowances for special promotions, etc. The only thing they really prohibit is long-term dumping.

[Edwin Pawlowski]

I do know the owner and have done business with him for over 15 years. Met him at the barber shop the day this happened. What do you suspect is the rest of the story?

[Steve B.]

On Sun, 04 Sep 2005 19:34:36 -0500, Duane Bozarth wrote: =>

Not true in Florida. No station is allowed to sell gas below cost to stop the big boys from running the little guys out of business. Don't know if other states have similar laws.

Steve B.

[Edwin Pawlowski]

That something is the pressure of the distributors. He would not be selling at a loss and that is why he did not want to raise prices for a second time the same day as he had gas in the ground to pump. It is simply how the system works. Play by my rules or I take my ball and go home. Independent stations are not truly independent.

[Steve B.]

Why would you doubt Florida lawmakers ability to create stupid laws? Trust me they are very capable. Gas stations are not allowed to sell gas below their cost at any time for any reason. No exceptions.

This law has been talked to death on local news with the recent gas price hikes.

Steve B.

[Edwin Pawlowski]

I don't know the legality of it all, but it may not be OK to tell the retailer what to price at. OTOH, if you don't like our suggestion to increase. we have 50 other legal ways of shutting you down.

[Duane Bozarth]

"Steve B." wrote: ....

Simply assuming that despite outside appearances to the contrary there would have been at least a small modicum of common sense...

That's ok, they passed one of those "pi == 3" laws here once upon a time, too... :)

[Duane Bozarth]

The question I still has is--"Why would they do that?" What's to their advantage? The only thing I have ever seen is that of moving not enough product to satisfy the distributor or some other reason that boils down to the same thing. Here where it's a long transfer as compared to much more populated areas, for example, the transportation cost is harped on regularly, but it's the same thing--they sell far less product per tanker-mile as compared to say, Wichita and environs.

I'd have to know more about the locality and underlying markets and driving forces to comprehend.

At one time (but this was well over 50 years ago now) there was a single distributor in this area who was an absolute proverbial ass. Grandad and his cronies had to file suit against him in order to get started w/ the local Co-op with being able to sell any petroleum products. I suppose if some such of a true monopoly were to exist in your area it would be possible, but that seems unlikely to me today.

[Duane Bozarth]

If I recall my junior high geography, the whole state of CT isn't much larger than the distance from here to Wichita...

I suspect in the NE the dynamics significantly different than in the midwest.

That there is collusion on some pricing is certain. However, the fact that oil and gas trade on the mercantile exchanges pretty much guarantees that the current market costs are the same for everybody so there really isn't any room for dealer-to-dealer price variations. The competition between suppliers is resovled at that point, not at the local levels.

I don't have sufficient data to be able to comment on possible predatory pricing in urban areas--it certainly could be true as it has been in other industries. That's a type of environment w/ which I have (thankfully) absolutely experience.

The only time I've ever spent in the great state of CT has been at the CE facilities in Windsor Locks and that ended back in the early 80s when I left the employ of B&W and went to a consulting firm instead of working directly for a vendor except for one 2-week period of some testing at their pulverizer lab in the early 90s.

[Duane Bozarth]

What part of the connection between wholesale and retail prices is difficult for you to understand?

[Edwin Pawlowski]

Because they can. They want all stations selling at the same price no matter what the oil presently inthe ground cost. No dealer gets an advantage over the other. They have the market locked and want to keep it that way and controlled tightly.

Transportations cost is BS too. I know of stations 50 miles closer to the storage tanks selling higher than lower volume distant stations. Here in CT the state is broken into pricing zones. The city of Hartford is broken down to smaller zones, the highest prices being in the poorer neighborhoods where people are less likely to drive out of the area to find cheaper gas. There was a story about this in the Hartford Courant a year or so ago. When the reporters asked the distributors about it and why, they were pretty much told, "so what, we can do it."

Here in town I pass a Shell station every day on my way to work. Another Shell station 7 miles south, closer to the tank farm is always 10¢ a galon more. Then I go to Manchester, another 40 miles further and a high volume stations is 6¢ more. This is year round no matter the base price the spread is maintained.

Only driving force I'm aware of is "we can do it so we do"

Probably a series of monopolies as each distributor has his stations and they all protect them the same way.

I'm in the plastics industry and we have three US suppliers of material. They have all been the same price for the past 35 years I've been in the industry. One raises and lowers price, the others do too. What a co-incidence for that many years. There are a couple of suppliers in Korea that sell the material about 15¢ cheaper, but you have some risk if you try to use too much of it. The supplies dry up and delivery is unreliable (plus or minus 30 days). If you cannot get the foreign stuff for a couple of months, the US suppliers will only sell you based on what you did that period the past year. That keeps a gentle squeeze on your scrotum.

[Michael Daly]

The wholesale price of the two may stay linked, but the _retail_ price is not set on any exchange. What part of that is so difficult for you to understand?

Mike

[Duane Bozarth]

mercantile exchange

quite highly

You're the one who seems to have changed the subject...I simply pointed out (quite a bit earlier) that gasoline is a commodity traded on the open mercantile markets which is where wholesale prices a pegged as opposed to being unilateraly set by some specific entity. Retail prices hence follow with various other factors and forces, some of which I have also mentioned.

I have no idea what you're onto now.

[Michael Daly]

A few years ago, I had to review hundreds of contracts between a major oil company and its various dealers (in several different classes). I saw the contracted shipping costs. They were set by volume and distance. However, the shipping costs were a small fraction of the difference in price found at the stations. Typically the cost was between $0.01 and $0.02 per liter and the retail prices differed typically by about $0.04 to $0.06 per liter. This when gas was just under $0.50 a liter. Claims that the differences of 10% were due to shipping cost were BS.

Mike

[Tom Miller]

mercantile exchange

quite highly

We're talking about a sudden rise in gasoline prices. Don't change the subject. If you want to talk about investing, I'll be happy to teach you.

[Liz]

Bull Feathers! If the station owners don't have a cushion to fall back on they have no right owning a business...and I'm stating this as a long time business owner myself.

Liz