Evidence of Price Fixing by Oil Companies?

By Guy Cramer

August 25, 2004

I have written many papers, many have gained only subtle notoriety or caused minor change to the world which we live, however, one of my recent papers (posted May 15, 2004) has appeared to save the general pubic hundreds of millions of dollars and will likely go on to save billions, just over 1,400 people have read this paper but the findings have caused the oil companies to change their formula for calculating the price you pay at the pump in our favor.

In that paper (Part 1) I pointed out that the percentage rise in the price of crude oil was passed on to the consumer with an equal percentage rise in the price of gas at the pump, while this appears fair only until I pointed out that crude oil costs consists of only 37% of the price you pay at the pump and that taxes make up 43%, refining and marketing costs consist of 17% and only 3% is profit for the oil company.

The oil companies had been adding the same percentage increase of the crude oil costs to the taxes, refining and marketing and the profit, this leaves the percentages intact but the consumer paying allot more than they should have.

The picture below shows the average retail price in Canadian funds per liter of gas, to our American friends south of the boarder I have added the USA Average so you can see what the equivalent would be in Canadian cents per Liter (you pay allot less than we do). Note the Vancouver price is for Vancouver, Canada.

Our paper came out on the 15th of May. Did the paper affect the trend of matching the increase with crude after this point?

In the next graph below I have taken the same graph and overlaid the price of crude oil in Dollars per Barrel (Yellow line). We can see that the trend continues until the beginning of July not only for Vancouver but also for Canada and the US price of gas at the pump. Had the trend continued from July to August we should be paying about 37% more than we are as of August 22nd 2004. While the oil companies boast about self-regulation, fair play and deny cooperation in price fixing, further evidence shows that price fixing may be common with the Oil Companies in setting the price at the pump.

In reviewing the graphs for this paper I noted another trend that shows up predominantly in the Vancouver price. Looking closer at this trend I noted a few anomalies below:

The black arrows indicate the price on Friday, all near high’s except for August 6th and July 2nd.  The Blue Arrows indicate Mondays, July 1st was a holiday in Canada as was August 2nd, which are the same weeks that don’t follow the Friday peak anomaly. Another noticeable trend is that of Sunday – Monday lows showing a tooth pattern on these days, Monday is slightly lower on average over Sunday.

If this was a traded commodity in the market and we bought on each Monday and Sold on Fridays, we would have gained 53% in this two month period with only one trade out of the 8 showing a loss with the average trade gaining 6.745%. If we also were able to short this commodity selling short on Friday and covering on each following Monday (you make the difference in the drop so if it falls by 3% your short gains 3%) we would gain another 50% for a combined total of 103.42% in gains we could make if we went long (Buy/Sell) and Short (Sell Short/Cover) and this was a tradable commodity.

Now there is another anomaly of high Tuesdays and Low Thursdays. When combined with the High Fridays and Low Mondays we see buying on Monday –Selling on Tuesday and Buying on Thursday and Selling on Friday would have gained 98.30 percent within these two months. If we could also short Friday – Monday and Tuesday – Thursday, the total for both the Longs and the Shorts would amount to 186.37% gain. Note again that the only differences to these trends are on the weeks where a holiday occurs – July 1st and August 2nd.

By the way to all the people in Vancouver – we have paid an average of 6% extra or more over the Canadian Average for the past two months – our lowest prices only touch the average line for the rest of Canada maybe this is the reason for the bounces to squeeze more out of the consumer but pointing to Monday and Thursday averages and claiming it is the same as the rest of Canada. Can someone explain to me why a main port city that receives oil tankers with numerous oil refineries located in the region pays 7%-10% higher price than the interior of BC (4 hours drive)?

Now these anomalies, and I only call it that because the oil companies claim price swings are market driven are even more strange considering that the prices move in unison with six big corporations separately involved in determining the price. And even greater still given the average price during this time hasn’t changed from 92.4 on June 25th and 92.6 on August 20th, these are amazing jumps in-between.

If the Stock Market indexes bounced 5% or more on a given day it would make headline news around the world. Our gas prices routinely bounce by 5-10% per day. Out of the 32 anomalous dates where we see these trends, only 7 (21% of the time) are below 5% or less of a difference, 78% of the time we can expect to see more than a 5% jump in a 1-4 day differences!

The Government of Canada and provincial governments have made numerous investigations into gas prices and state there is “no definitive conclusion on any sort of collusion, price-fixing or market tampering.”

Pardon Me!

I’ve spent only a few hours over coffee breaks and lunch times researching the gas prices and found flawed price increase calculations in the average price of gas where the increase in Crude Oil was passed on to all other areas of Gas Price and behold 45 days later the oil companies change this large trend but they continue with the practice of what appears to be Price Fixing and Collusion with these smaller weekly trends.

Our Governments have spent months and millions investigating the same thing and they never noticed these correlations! Considering that taxes make up 43% of the price of gas at the pump in Canada, and Petro-Canada a large Canadian Oil Company is owned by the Federal Government, you may begin to understand why big brother can’t find any problems. When the public hears from their trust worthy leaders that they didn’t find any wrong doing then the public perceives that due process was carried out and they believe that their findings are absolute.

When we go back 4 months we see that this set pattern anomaly in gas prices is so predictable that Old Faithful may have competition for random but predictable occurrences.

If the swings are random then it is the greatest example of structures in Chaos that I have ever seen, which means that there must be a God that runs a universe so designed that gas prices peak on Friday and Tuesday and fall on Mondays and Thursdays. Praise the Lord we have found subjective evidence that God exists.

Wait a second this would force us to believe in God and He does not provide absolute evidence in any one thing. This would counter faith that comes by our choice to believe or not with free will.

Either the price patterns are a random miracle that defies statistics or human intervention that could only be achieved through either a predetermined arrangement or understanding between the companies.

The Governments need to distance themselves from this obvious conflict of interest and place controls in fuel prices for the benefit of the consumers. The Oil Companies have shown that they cannot self regulate within the publics best interest.

With a minority Federal Government in Canada, this may be a great time for the parties to work together to solve these problems for the greater good of the people. Actually the three opposition parties could band together on this and outnumber the minority Liberal party, if the Liberals opposed gas price regulation as they have in the past.

References:

Part 1: Oil Companies and justifying rising Gasoline prices just Smoke and Mirrors

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