General Question

justwannaknow's avatar

When does Supply and Demand become price gouging?

Asked by justwannaknow (1369points) May 22nd, 2009

It seems that oil companies are always looking for a reason to raise the price of gas and use the excuse of supply and demand , regardless what they are paying for crude oil.

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6 Answers

CMaz's avatar

When it exceeded fair value.

delirium's avatar

With the addition of pointy things.

robmandu's avatar

According to Wikipedia:

Price gouging is a pejorative term for a seller pricing much higher than is considered reasonable or fair. In precise, legal usage, it is the name of a felony that applies in some of the United States only during civil emergencies. In less precise usage, it can refer either to prices obtained by practices inconsistent with a competitive free market, or to windfall profits. Non-pejorative uses are generally in reaction to what the writer believes is an unjustified restraint on the market.

I think you might also be interested in what Wikipedia has to say about:

Collusion is an agreement, usually secretive, which occurs between two or more persons to deceive, mislead, or defraud others of their legal rights, or to obtain an objective forbidden by law typically involving fraud or gaining an unfair advantage. It is an agreement among firms to divide the market, set prices, or limit production. It can involve “wage fixing, kickbacks, or misrepresenting the independence of the relationship between the colluding parties.” All acts effected by collusion are considered void.

spresto's avatar

They are gouging like hell right now.

robmandu's avatar

It takes weeks/months for oil purchased by the barrel today to wend its way through the refineries and distribution points before it ever gets to our local gas pumps.

So when gasoline prices fluctuate so elastically seemingly in time with the price of a barrel of oil, it certainly does make one pause and wonder what’s going on.

I have a hard time believing that the risk positions are so quickly and readily transfered to the consumer.

Saturated_Brain's avatar

Welll…. Supply and demand can never become price gouging as it affects the price based on pure market forces. Of course, the supply can be controlled (cough OPEC cough) such that the price will have to go up, in which case it probably isn’t price-gouging anymore (after all, who can really define what is ‘fair’ anyway?) but collusion. Basically, same effect, different method.

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