The analogy also works in the opposite direction. If a gas station is selling at $4.10 a gallon and another down the street is selling at $4.15, the first gas station could happily up their price to $4.14. 1% more revenue and they're still the cheapest on the block.
The theory is correct, but the example is not the best: petrol prices are not as elastic as you'd think.
If I need to make a left turn across traffic or go around the block I'm not topping off at a station just for 5 cents/gal. (Tho, I might make a mental note & use that station when I'm coming down the other way, when it's easy to in & out.)
Los Angeles in particular is crazy. We have the equivalent to micro-climates with fuel prices. Stations a half mile apart can be 30¢ different. Stations a town apart can be 70–80¢ different.
And there are a couple of stations in Beverly Hills adjacent that are ~$2.50 more than the going rate (no surprise there, tho).
Competitive markets keep things within a tolerance, imo. If the average is $4.10 then you can expect the price to vary up and down by some amount depending on location and other things provided.
What RealPage does is distinct because it assures prices are always above and by orders of magnitude what they should be. It also achieves that through private communication which I think is generally accepted as a problem.
You're right, order of magnitude wasn't the right choice of words. They're 3-4x what they should be, and RealPage is responsible for a sizeable portion on its own, which is saying something.
I think one thing that's weird to me is that Shell and Exxon or 76 or whatever all somehow got their gas to be somewhere in the same ballpark. You'd expect to see that some gas companies can't get their shit together and can't figure out how to extract, purify, and distribute gas at anything less than $500 per gallon. Now, naturally you'd expect those companies to just go out of business. And you'd also expect to see at least one that figures out how to do all of that for $1 per gallon. Yet, here they all are, selling it around the same price. It's too strange in my opinion. There is collusion happening in many markets. I suspect they are all producing it for way less which is why one of them doesn't suddenly go out of business, but the fact that they're not selling it so low that the competitors simply go out of business - again a collusion signal.
Many do go out of business, and many substantially undercut others. This is particularly true for the diesel market, where OTR truck operators are more price sensitive. Most stations are buying gas around similar prices at the terminal, but their overhead to provide the station can vary wildly between large chains and small, family owned stations.
“Skimmers” (drastically lower-priced diesel stations) are a real threat to larger chain stations. They don’t put them out of business entirely for a number of reasons, but one is because gas stations ultimately sell more than gas/diesel (e.g. a clean bathroom is often worth a few extra cents per gallon for me, but there’s a lot more than that too). Also any given station can’t sell an infinite amount of fuel. Beyond tank capacity, wait times are a real impact on sales volume, and so if a station offers a price too low (even if still profitable), it is just leaving money on the table.
So not to say collusion doesn’t happen, but one can also arrive at similar pricing with a commodity like gas without it. Especially since fuel margins are typically low.
They are all selling the same gas from the same refinery. They might have slightly different additives but otherwise it all comes from the same place. you can't afford shipping costs to get gass from a different refinery (unless you are on a territory border)
the only question is how much profit to put on top and even then they have to be careful as if they go too low their competetors won't follow and then they have to pay extra for an unscheuled delivery just to fill their tank.
i'm reasonable certian that small stations are illegally colluding in some cases.
