Pricing Games – Vendor Madness

I filled up the car with gas for $1.97 a gallon a few days ago at one of this group of three gas stations about 5 miles from my house that have been selling gas for 20 to 40 cents less than everybody else ever since about the middle of September. There are a handful of single stations around the region who have been similarly discounting their prices.

I bet there is some great liturature on how gas station owners signal each other to assure that prices are set in a way that avoids driving them all out of business. So I’ve been wondering about this handful of stations that appear to have decided to ignore that and attempt to sell huge volumes of gasoline at very low mark ups. I find these self regulating markets thought provoking. Presumably the other gas stations in their local area are – ah- no pleased.

Turns out the three stations are owned by one guy. Yesterday the town showed up to install new curbs around one of his stations. The town didn’t bother to tell him they were comming. The town’s story is that some of his buyers were darting in and out of traffic and that better curbs would regulate things better.

This effectively shut down that station, in particular the gas delivery truck couldn’t get into the station. This stressed out the owner.

So he lowered prices for a hour to $1.04. Word quickly spread and the entire road was quickly backed up with eager buyers. His daughter says he lost $6,000. The town wants to charge him for the extra traffic police costs this triggered.

The owner’s stress level rose further. Apparently he then wrapped him self in the american flag, showed up at the stations, threatened suicide, and well had a nervous breakdown. He’s in the hospital now.

At this moment all three stations are closed, which I suspect made the rest of the stations in that part of town happy. I suspect there is more to this story than meets the eye.

Meanwhile the mess in the natural gas market looks like it’s just getting worse and worse.

“We need to declare a national crisis,” Andrew N. Liveris, the chief executive of the Dow Chemical Company.

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