Gas prices look like they are going to drop today. That’s a good thing relative to the current price, but considering how much they went up last week, they’re still going to be kind of high. 119.9¢/L seems a little bit ridiculous when the price of crude is hovering at or under $50/barrel, some of the lowest prices in years.

Courtesy WikipediaWe’re never going to be happy when gas prices go up, that’s a given. It’s always a given that sometimes costs go up for businesses, and therefore the price of their product needs to go up. I understand how businesses in a free-market economy don’t want to be regulated by price boards, similar to what utilities face. Competition is healthy.

Unfortunately, to the layperson like me, these businesses appear not to compete. I’m not talking collusion, and multiple government studies into collusion in the oil and gas industry have came up empty when looking for it.

Then again, who needs to collude when you know that if you up your price, the other guy will match it… or if you drop your price, he’ll match it too? You don’t need to collude once the pattern has been established. The problem here is not collusion. The problem is no real competition.

So, make them compete.

I think it would be fairly easy to force competition, legislate price differences. The way I see it, there would be a two step approach.

  1. Make it the law that if you raise your fuel price at a station, then the station must stay at that price for 48 hours. If competitors don’t raise their price, you are stuck there and will lose business. This means that nobody will raise their price unless absolutely necessary, for fear they will lose 48 hours of business.
  2. When raising prices, require that the pump price cannot be the same as the 5 closest competitor’s stations, or within a certain radius. If station A goes to 124.9, then station B would have to go to 124.7 or 125.1 – Small differences, but it forces an actual competitive price, instead of everyone going up the same amount within hours of each other. Price matching would not be required when lowering prices, that way after the required 48 hours you could lower your price to match the competition. What this does is “punishes” the first station to raise the price, as most competitive stations would go lower.

Would these necessarily change gas prices or make them necessarily lower? Probably not in the long run, but at least it might slow down increases and force gas companies to at least compete some of the time.

And after all, isn’t healthy competition what the Free Market is all about?