Retail gasoline prices and the appearance of collusion / by kevin murray

According to, "Total U.S. spending on gasoline is projected to rise 7.5 percent from 2017 to nearly $365 billion…" in 2018, in which, "the average U.S. household would spend roughly $1,900 on gasoline in 2018."  Quite obviously, anyone that owns a gas powered vehicle, correctly understands, that their vehicle requires gasoline in order to be operated, so that, whether gas prices are high or low, consumers are going to have to pay whatever that they have to pay, in order to accomplish their given tasks, such as going to school, work, play, or entertainment.


The importance of the price of gasoline can also be demonstrated by the fact, that unlike most other shopping experiences, gasoline prices are prominently displayed so that consumers of such are well aware of just how much it costs them to fill up their car.  In addition to that, there are a multitude of gas stations, that consumers can avail themselves of, though some gas stations are limited to serving only those that are members of a warehouse club, such as Sam's Club or Costco; or offer additional discounts only for those that shop at their grocery store, such as Kroger, depending upon how much money is spent on groceries, providing consumers then with an additional discount per gallon of fuel purchased.


The thing though about all these gas stations, is that the pricing within a particular county, or within a particular city, or within any area, in which the tax rate for that gasoline is the same tax rate for all those other gas stations, is that the retail price of that gasoline does not vary much from one station to another.  Perhaps, it could be said, that is simply one station matching the price of another, and demonstrates fully the vibrancy of competition in this great nation.  Then again, the fact that there is such a minute difference in prices from one gas station to another, probably reflects that each gas station is pretty much mirroring the other gas stations, and making sure then to keep within a few pennies of the other, so that in the scheme of things, there isn't any real material difference between one gas station price to another.


While it probably can be stated that gasoline stations do not knowingly collude with one another, because that is a rather serious crime with serious punishment to go along with it; the fact of the matter is that retail gas stations do not need to collude with one another as long as they have a general understanding that they will not deliberately undercut one another in a manner in which, they lose, and the consumers win.  In fact, the gasoline business is a volume business, and those retailers of gasoline well understand that as long as their margins are positive, they will do just fine; so then, unlike most other businesses which are actually truly competing, the retail gasoline business, does not ever sell gasoline at the price that would adversely impact their historic margin rates, not because they could not afford to, from time to time, but because they don't need to and they won't have to because nobody with sensibility will ever break the unwritten rules between them.


Whether a given consumer drives all around town to find the best gas price or not, the bottom line, is that whatever savings there may be, can be measured in pennies, here and there, and despite whatever brand that gas station so represents on its signage, they all pretty much are the same, for though the name may differ, their game is essentially the same.