Matt D
Topic Author
Posts: 8907
Joined: Fri Nov 19, 1999 6:00 am

The Truth About Gas Prices

Wed May 09, 2001 12:24 am

Ok...i'm sure you all are aware of how gas prices in this country are spiralling out of control, and are wondering why.

As someone who works in the gas industry (I work in distribution for a large company), perhaps I can set the record straight.

Wanna know where the blame for this mess lies?

I'll tell you:

It's with the press.

That's right...the and news magazines.

It is nothing more than the oil companies capitalizing on a "panic" situation.

Remember how last year, and the year before that, when everyone was complaining about gas prices?

And the press also reported that the oil companies reported record profits?

Well, it's the same thing this time around.

Sure, there are some problems (like that pesky fire at Tosco a couple weeks ago), but those are commonplace, and overall don't have much effect on the overall cost.

Instead, here's what happens:

All the dealers read in the newspapers that gas prices are going up. So they all call in and place double the number of orders for delivery. They make our lives hell by trying to fill their tanks at the lower price, so they can sell it at the higher price when the price changes take effect. By all of them doing that (my company has close to 1000 stations that we deliver to), we soon fall behind-because while the number of orders goes up, the number of trucks we have to deliver the product remains the same. So what happens? Either the dealers run out of gas, or they raise their prices to slow their colume down.
Eventually, we'll fall so far behind on our delivery schedules, that we have no choice but to raise the price just to do what the dealers are doing: we raise it to slow down the volume so that we can get our schedules caught up.

Then, finally, as we get our deliveries caught up, the press puts out another scare scory about how prices are going to go up again, and thus launches the vicious cycle all over again.

This is the "product supply" problem that the press loves to report. It clearly shows that they have no real idea what they are talking about. They see that the tanker trucks aren't showing up, and report that as a "product supply" shortage. What they DON'T know is that our trucks' schedules are so far behind, that it gives that impression.

Sure, we do have gas terminals that run out of product all the time. It is normal in this business. Most of the time, however, the public is not aware, and the outage lasts only a few hours or a day at most. We then simply haul the loads out of an alternate terminal.

It all boils down to this:

The press scares (and prepares) the public into thinking they're going to have to pay more. So we at the oil companies say, "Ok..they're willing or at least ready to pay for it..why not increase the price and add to our profits (and bonus checks at the end of the year)?"

The dealers read the same stories, know that we are going to raise the price. So they try to get as much "lower priced" gas as they doing so, we end up with angry dealers out of gas, and delivery schedules that we cannot keep. So then we have no choice but to raise the prices.

Thanks again to the press for making us look to be "the bad guys".

Let's see them sit in my shoes for a day at work.

Then you can see where the real problem lies.

If any of you has any questions, ask someone that works in the business. Don't go to the biased press, the source that only knows half the story.
Posts: 1253
Joined: Thu Oct 07, 1999 1:42 am

RE: The Truth About Gas Prices

Wed May 09, 2001 4:08 am


it's very similar to what we're stuck with the energy mess in California, and gas is affecting power generation a bit as well, here's a snippet of a Sacramento Bee article that I found fascinating and the media stepped right in and blew it up into this energy crisis, in reality we aren't having that much of an energy crisis in the first place, but with a variety of factors (including some real screwballs in government rushing the deregulation and the media)

On July 9, 1998, the price for reserve power needed by the ISO was running at $1 a megawatt hour and was being tracked on computer screens in the market operations department of the agency.

A staffer hurried up to ISO chief executive Jeffrey Tranen with a note. The $1 price tag, set by the power generators, had shot up to $2,500. Then, just as suddenly, it spiked again to $5,000, where it stayed for three hours.

After that, it mysteriously dropped again, all the way back to $1.

Four days later it happened again, but this time the price went to $9,999 and stayed there for four hours. Then it dropped to a penny.

"All of us saw those numbers and realized ... there was nothing to stop someone from bidding infinity," said Tranen, now a software executive.

Under the rules, the identities of power generators are kept secret. But Levin, the New York businessman who'd warned of higher prices back in 1994, said the price spikes were clear signs of someone probing for weak spots.

"They were experimenting from Year One," he said. "Early on, people learned how to work the magic."

The ISO saw the problem, too, and moved to cap prices. But it was clear that California markets were vulnerable to manipulation. The damage was done, and the gold rush was on.

Source: Sacramento Bee
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