What’s Up at the Pump: Understanding Gasoline Markets

Oct 07, 2003


Dr. Bart J. Wilson
Professor of Economics
George Mason University, Interdisciplinary Center for Economic Science

Dr. Cary A. Deck
Professor of Business
University of Arkansas, Walton College of Business 

Click here to listen to audio archive.

Consumers packing up their family minivan this Thanksgiving might get a bit of a break when they fill up their tanks. As of October 14, 2003 gasoline prices have fallen about 10% from their peak last spring to a national average of $1.57 a gallon for regular unleaded.

But are gas prices as low as they could be?  Consumer advocates and gas-station owners say industry giants such as ExxonMobil and ChevronTexaco play “pricing games,” and when pump prices climb these consumer groups protect their interests by filing lawsuits and proposing legislative actions.  The courts and other researchers, however, have failed to reach a consensus on whether American drivers are getting ripped off when they fill their tanks.

Because this issue effects every American right in the pocket book, the debate over gasoline pricing is not something that is likely to go away anytime soon.  Yet because this debate is complicated by so much charged political rhetoric, policymakers might find it difficult to discover the reality of the situation, much less improve it.

To help Congressional staffers better understand the myths and realities of the retail gasoline market, the Mercatus Center at George Mason University is offering a hands-on seminar that will focus on the issues that are at the heart of the debate, zone pricing and divorcement, and give policymakers the opportunity to take on the roles of station owners and refiners in a computer-simulated gasoline market. 

Because policymakers will take on the actual roles of participants in the market, this program will leave participants with a fuller awareness of the complexities of gas markets and a better understanding of the effects associated with zone pricing and retailer/wholesaler integration.