price-gouging

[swansont]

2 hours ago, npts2020 said:

Virtually all of these laws are only applicable to the aftermath of some kind of disaster or emergency, however. What about increases every month or year? During the oil crises of the 1970's, crude oil reached over $150 a barrel yet prices at the gas pump never exceeded $1/gallon in most places. Today, oil is about half the 1970's price and we are paying over $3/gallon. Are oil companies price gouging and if they are, is anyone doing anything about it?

I think you are comparing apples and oranges. In this case, inflation-adjusted prices and nominal prices.

When crude hit $150 (Dec ‘79) that’s in adjusted dollars; the nominal price was $38

https://inflationdata.com/articles/inflation-adjusted-prices/historical-oil-prices-chart/

The inflation adjusted price of gas then was north of $3.50. I’m guessing you’re citing the nominal price 

https://zfacts.com/gas-price-history-graph

Leaded gas was sold back then, and was cheaper than unleaded. 

[npts2020]

5 hours ago, exchemist said:

Are you sure about that? I don’t recall it ever exceeding about $40/bbl in the 1970s.

It is my mistake, oil was actually just over$100/barrel but the point remains that oil companies are charging for more now with a greatly reduced price of crude.

 

5 hours ago, iNow said:

For example, let’s make a similar argument in context of evolution and local governance. Let’s assume your neighbor is bigger and stronger and owns more guns than you do. Let’s assume he steals from you, takes your food, your car, and rapes your wife whenever he feels like it. Following your logic, that should be perfectly allowed and celebrated all because you were too weak to stop them.

Except there is one major difference. AFAIK no significant portion of the US population supports this or your other example, whereas we supposedly support capitalism

5 hours ago, iNow said:

Often the good of the many outweighs the good of the few, or the one… and this is especially true in context of price gouging. This point seems so self-evident to me that one wonders if failing to see it may be due to some anti-social tendencies. 

And I would argue that capitalism IS antisocial.

[swansont]

23 minutes ago, npts2020 said:

It is my mistake, oil was actually just over$100/barrel but the point remains that oil companies are charging for more now with a greatly reduced price of crude.

But the difference is not nearly as great as you suggested, and the gas we sell now is actually more expensive to make. As I recall, lead additives boosted the octane levels. Car engines started requiring higher octane levels. The EPA also started requiring “summer blend” gas in the summer in the 90s, which also costs a little more. So gas has become more expensive independent of the oil price for unleaded gas, from environmental requirements 

And as fuel gets more expensive, transporting it becomes more expensive.

[exchemist]

23 minutes ago, npts2020 said:

It is my mistake, oil was actually just over$100/barrel but the point remains that oil companies are charging for more now with a greatly reduced price of crude.

 

Except there is one major difference. AFAIK no significant portion of the US population supports this or your other example, whereas we supposedly support capitalism

And I would argue that capitalism IS antisocial.

When, in the 1970s, was crude $100/bbl, and what is the source of your information? I don’t believe it ever got anywhere close to that, or not for long enough to affect the cost of petroleum products. As I recall it was in the 30s most of the time. That was itself a shock compared to the prices in the 1960s, which were in single digits, but $100/bbl sounds fanciful to me. But if you have a solid source for it I’ll happily concede my memory is at fault.

[zapatos]

2 hours ago, npts2020 said:

It is my mistake, oil was actually just over$100/barrel but the point remains that oil companies are charging for more now with a greatly reduced price of crude.

 

Citation please.

[J.C.MacSwell]

Most agree with free enterprise...at least when they are buying...

Most agree capitalism is a two edged sword that needs government constraints against abuse...

But most also conflate the two...

[exchemist]

13 hours ago, swansont said:

I think you are comparing apples and oranges. In this case, inflation-adjusted prices and nominal prices.

When crude hit $150 (Dec ‘79) that’s in adjusted dollars; the nominal price was $38

https://inflationdata.com/articles/inflation-adjusted-prices/historical-oil-prices-chart/

The inflation adjusted price of gas then was north of $3.50. I’m guessing you’re citing the nominal price 

https://zfacts.com/gas-price-history-graph

Leaded gas was sold back then, and was cheaper than unleaded. 

That sounds correct, yes. Using an inflation-adjusted figure could well lead to a crude price above $100/bbl but then, as you say, one obviously needs to compare that with a fuel price that is also inflation-adjusted. 
 

I do get a bit fed up with this constant belief in price-gouging by fuel retailers, actually. Unit margins for fuel products in the oil industry are always fairly tight, due to the fact the products are commodities that are widely traded internationally  by numerous parties. It is pretty hard for manufacturers to manipulate the prices of such commodities, because there are so many sources of supply.

The low unit margins are why the supermarkets are taking over fuel retailing. By combining it with grocery sales they can make money in the shop to supplement the tiny margin, or even sometimes loss, they make at the pump. The fuel operation serves mainly to  draw the customers in, when they need to fill up. The supermarkets themselves buy the fuel  by shopping around among the traders on the commodities market for oil products.

9 hours ago, npts2020 said:

It is my mistake, oil was actually just over$100/barrel but the point remains that oil companies are charging for more now with a greatly reduced price of crude.

You are misinformed. See @swansont ‘s comment re possible confusion between actual and inflation-adjusted prices. See also my further comments above on retail fuel margins. 

Edited September 29 by exchemist

[iNow]

8 hours ago, exchemist said:

I do get a bit fed up with this constant belief in price-gouging by fuel retailers

Even more annoying to me is how commonly poorly informed voters simplistically assign blame to US Presidents for high fuel costs, but both of us are now venturing off topic on this front.

[exchemist]

13 minutes ago, iNow said:

Even more annoying to me is how commonly poorly informed voters simplistically assign blame to US Presidents for high fuel costs, but both of us are now venturing off topic on this front.

Hear hear. It’s absurd. It’s global supply and demand. The US President has bugger all influence on it, except as an indirect consequence of geopolitical decisions.

But we’re not really off-topic, because the whole issue of “price-gouging” is highly political, suiting politicians to talk up when they want to curry favour cheaply or find an easy scapegoat. There are some blatant examples  of course - the Shkreli affair springs to mind - but it’s a minefield of bullshit (to mix metaphors). For instance I was depressed to read Harris has been trying to play the price-gouging card, inviting a certain amount of ridicule from economists, apparently.

[swansont]

12 hours ago, exchemist said:

I do get a bit fed up with this constant belief in price-gouging by fuel retailers, actually

In the 70s it was the big oil folks; as you point out, retail margins are small. And actual competition exists in most places. But when OPEC drove up prices, US oil produces had huge margins, which is why there was a windfall profits tax. A US oil producer had no incentive to sell below the worldwide market price, so if oil was at $30 bbl, but your cost were at $10 bbl, you’d still sell at $30. (The tax just incentivized domestic cutbacks in production, though)

Or (and I think this happens today) you export at the higher price and create a supply constriction in the US to drive up the domestic price.

[exchemist]

31 minutes ago, swansont said:

In the 70s it was the big oil folks; as you point out, retail margins are small. And actual competition exists in most places. But when OPEC drove up prices, US oil produces had huge margins, which is why there was a windfall profits tax. A US oil producer had no incentive to sell below the worldwide market price, so if oil was at $30 bbl, but your cost were at $10 bbl, you’d still sell at $30. (The tax just incentivized domestic cutbacks in production, though)

Or (and I think this happens today) you export at the higher price and create a supply constriction in the US to drive up the domestic price.

Oh sure the upstream margins on equity crude can be huge when the crude price is high. But this for decades now has been driven by OPEC, i.e. cartels of national producers, not by oil companies. The amount of equity crude owned by oil companies, as opposed to national organisations nowadays is pretty small, less than 10% if I remember correctly.

I'm not sure how one would create a supply constriction in the US, though. There are so many supply sources, both domestic and international. How would that be engineered? 

Edited September 29 by exchemist

[npts2020]

Ok, let's put this into perspective.

Unfortunately, I couldn't find a chart that compares crude oil price with gas price over enough time but here is a chart of crude oil prices since 1946 in 2023 dollars.

https://inflationdata.com/articles/inflation-adjusted-prices/historical-oil-prices-chart/ 

Note when crude oil prices peaked at the end of 1979 at around $160/barrel and remained above $100 for a couple of years and cost for the past 2 years, mostly between $65-$80/barrel

Here is a chart of gasoline prices since 1929 in 2022 dollars so should be close enough for purposes of illustration

https://www.titlemax.com/discovery-center/average-gas-prices-through-history/

Note that gas prices in 1979 peaked at $4.25/gallon (and stayed that way for a couple of years prompting the "windfall profits tax" mentioned by swansont above) and even though the more recent price at the pumps reached nearly $5/gallon we can still use the current (according to AAA) price of $3.20 for comparison

 

 

If we compare when crude prices sustained $120 (or about $2.86/gallon of crude) price of gas c1980 gasoline was $4.25 IOW 67% of the cost, with today (I'll be very generous and use the $80/barrel and $3.20 gas figures) which works out to 60%of the cost. According to these guys https://ethanolrfa.org/media-and-news/category/news-releases/article/2023/02/new-university-study-ethanol-cuts-gas-prices-by-77-cents-per-gallon , Ethanol actually reduces the cost of a gallon of gas (even if it also reduces its energy content and has other drawbacks) and since unleaded and leaded gas cost about the same to produce (according to The Washington Post https://www.washingtonpost.com/archive/business/1985/12/29/end-nears-for-leaded-gasoline-and-for-bargain-fuel-prices/de18ff9b-00f0-45d3-8539-b4df60d0e3c2/ ) they will not be a consideration for me in this discussion. Also, if anyone can show me that other costs are significantly different between the times under consideration, I will take that into account. What this shows is that oil companies are making approximately the same dollars per gallon (even with the figures significantly skewed in their favor) because of that higher percentage markup. My apologies for using this example since there are many similar ones but the question (even if you disagree with the figures presented) still remains unanswered is it price gouging? If not, at what point does it become price gouging? I understand this is a difficult thing to quantify but it seems to me quantification must be attempted before any reasonable discussion about a remedy can take place.

Edited September 30 by npts2020
clarification

[zapatos]

18 minutes ago, npts2020 said:

My apologies for using this example since there are many similar ones but the question (even if you disagree with the figures presented) still remains unanswered is it price gouging? 

 I understand this is a difficult thing to quantify but it seems to me quantification must be attempted before any reasonable discussion about a remedy can take place.

This has already been answered by both Endy and swansont. Since you don't feel their data answered the above question, perhaps you can explain exactly what was wrong with the figures and explanations they gave you. That way we can understand exactly what it is you are looking for.

[npts2020]

19 minutes ago, zapatos said:

This has already been answered by both Endy and swansont. Since you don't feel their data answered the above question, perhaps you can explain exactly what was wrong with the figures and explanations they gave you. That way we can understand exactly what it is you are looking for.

So since the question has been answered, price gouging can only occur after a disaster or market disruption. Got it.

[zapatos]

14 minutes ago, npts2020 said:

So since the question has been answered, price gouging can only occur after a disaster or market disruption. Got it.

If you are not going to bother to read what people write you are wasting everyone's time.

[npts2020]

2 minutes ago, zapatos said:

If you are not going to bother to read what people write you are wasting everyone's time.

I have read every word in this thread and looked at all of the links. If you can please repost the place where I missed price gouging being in reference to anything other than after a disaster or market disruption, it would be greatly appreciated. Otherwise, I can only assume that you believe the question to be answered by only applying the term to those situations and it not being valid in any other context.

[studiot]

7 hours ago, npts2020 said:

I have read every word in this thread and looked at all of the links. If you can please repost the place where I missed price gouging being in reference to anything other than after a disaster or market disruption, it would be greatly appreciated. Otherwise, I can only assume that you believe the question to be answered by only applying the term to those situations and it not being valid in any other context.

I really don't understand this thread,though I too have read every word.

For instance I have a 'feeling' of what price gouging as, as probably does everybody else.

But I really think matters are far more complicated than is being portrayed here.

Surely Zapatos    example on the previous page is not a result of disaster or market disruption ?

 

Here is another example, that illustrates the complications that may be hiding in the background.

 

If I go to  a fair, an exhibition or other temporary event I expect to find that ice cream, burger and hot dog prices etc seriously inflated, sometimes by integer factors rather than %.

Is that price gouging on behalf of the suppliers ?

Well the hidden factor is to consider a typical ice cream vendor van who may have taken a pitch at the event.

His costs will be increased substantially by the organisers' charges for the pitch as compared to setting up on a layby on a summer afternoon or trawling a housing estate.

So who then is price gouging or the organiser ?

Or perhaps the premises owners ?

Or perhaps the financial institutions wanting a return on their investment ?

Edited September 30 by studiot
Better English

[StringJunky]

Price gouging is buying a Cold Play or Taylor Swift ticket  for £150, by swamping with requests with a bot army, and then selling them on the secondary market for £3000.

[zapatos]

Buying out a store's supply of the "toy of the year" at Christmas and tripling the price on Facebook Marketplace because you know the parents will do what they can to not disappoint a child.

[studiot]

+1 Thanks both

 

I note quite a few posts about oil pricing strategies.

One strategy that has been prevalent in the UK is that since oil companies control the end user supply, even if they no longer control the production or bulk supply, is for them to price domestic fuel oil competitively (ie slightly lower) than the equivalent gas or electric alternative.
This has ensured continuity of market for decades.
They could have 'price gouged' those who are not connected to the gas or electricity grids.

 

[CharonY]

On 9/28/2024 at 5:31 AM, StringJunky said:

I remember that. Martin Shkreli got 7 years jail for securities fraud and a lifetime ban from the pharmaceutical industry. It also set off several investigations into drug pricing.

I think the other conviction is relevant to the price-gouging scheme, which essentially boiled down to attempts in creating a monopoly. Essentially after jacking prices, he also prevented generics from entering the market. In other words (and as already said) one mechanism for inflating prices is to manipulate the market, which in turn requires governmental controls (i.e. checks on capitalist systems). 

And there are other situations where it may be possible, including markets where there is imperfect information (arguably diamonds could qualify, but certainly also health care) or where options are limited for whatever reasons (again, healthcare is a good example). 

[TheVat]

Just looked in, want to offer a distinction between gouging and fixing (if this was already done, apologies).  When monopolistic action creates inflated prices, or an oil cartel manipulates market, that's price fixing.  When an actual scarcity of an essential item occurs, for the consumer, and vendors take advantage of this, that's price gouging.  Fixing happens at the level of cartels and boardrooms, gouging happens down at the grocery or hardware store.  For ticket sales or other non-essential items, that's a slightly different thing called scalping (which also is mean-spirited, for sure).  After the storm, I need propane or bottled water or food, those are scarce and one store has them - if they quadruple the prices, that's gouging.  If they increase the price 30 percent due to more expense keeping up inventory during a disaster, that's just a normal market force.

[iNow]

When demand exceeds supply's slender frame,
Price gouging inflates costs, exploiting the gain.
This unfair practice takes advantage of need,
Leaving consumers with a financial bleed.

Scalpers, too, resell at excessive rates,
Buying low, selling high, with profiteering weights.
Price fixing, a collusive, hidden scheme,
Undermines competition, harming consumers' dream.

Laws step in to protect and defend,
Consumers' rights, a fair market to amend.
These practices harm families, with unfair might,
Laws ensure fairness, protecting what’s right. 

[swansont]

On 9/28/2024 at 6:09 PM, swansont said:

But the difference is not nearly as great as you suggested, and the gas we sell now is actually more expensive to make. As I recall, lead additives boosted the octane levels. Car engines started requiring higher octane levels. The EPA also started requiring “summer blend” gas in the summer in the 90s, which also costs a little more. So gas has become more expensive independent of the oil price for unleaded gas, from environmental requirements 

And as fuel gets more expensive, transporting it becomes more expensive.

Also: federal tax on gas was 4 cents a gallon in the 70s. It’s 18.4 cents today. Lots of states have raised their taxes, too.