Sunday, July 29, 2007

Collusion in NWA Gas Prices Not Making A Statist of Me

OK, I will admit that I am frustrated. This weekend I went to Little Rock and back. Gas in NWA when I left was around $2.95, except at that CITGO on Olive Street in Rogers where it was $2.88. The owners of that station must not be going along with efforts to hold prices artificially high in our area. They are frequently a lot less than other area stations.

I then went down to Central Arkansas. The famous "Flying J" Conoco station in Russellville was selling it for $2.67 a gallon the same day most stations in NWA sold it for $2.95 a gallon or more! But we went past the Flying J that day and stopped at a Kroger in Conway. We used our discount card to get the gas for $2.60 a gallon. On the way back Sunday, we did tank up at the Flying J, where gas was down to $2.63 a gallon. Gas in Little Rock was about $2.85 this weekend.

It seems pretty clear that there is some kind of collusion or price fixing going on among most station owners in NWA. Even my conservative friends are tempted to ask the government to come in and "fix" this "problem". But if you will really think about it, the best way government can "fix it"...........

(continued, Click "Sunday" below and scroll down for rest of story or if sent straight here just scroll down...)

2 Comments:

Blogger Mark Moore (Moderator) said...

...is not to tighten up regulations, but to loosen them up.

In free market economics, when groups form a near-monopoly in an area and then start raising prices, it induces someone else to come in and enter that business. What prevents this from happening are barriers to entering into the business. In this case, the government has strict regulations about where gas stations can operate and what kind of tanks they can have, where they can be buried, etc....

Instead of agitating for the government to get even bigger and more powerful and telling the station owners what a "fair" price for their gas is, a small-government solution is to lower the government barriers to entering the retail gas business. For example, the government could change the regulations so that companies could sell gasoline right out of a tanker truck. "Fred's" could make a deal with "Flying J" to host a tanker truck in their parking lot one day a week. It would draw lot's of folks to Fred's and produce a lot of good feeling for Fred's. The Flying J could sell a lot more gas at prices closer to what they sell it for down in Russellville. And the guys up here that are fixing prices? Well, they would be forced to lower prices or face a horde of trucks from every gasoline distributor in the state.

The free market, when costs really are applied justly, works better than more government regulations. Lower barriers to competition, and the "invisible hand" of Adam Smith will do the rest.

6:48 PM, July 29, 2007  
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