Investigating Collusion Among Oil Refiners
http://www.wsj.com/articles/california-attorney-general-investigating-major-oil-refiners-1467302726
This summer, the California attorney general launched an investigation of major oil refiners in the state in order to determine whether the major oil refiners had colluded to withhold supply in an attempt to artificially raise gasoline prices. The three companies being investigated, Tesoro, Chevron, and Exxon Mobile, control over half of the refining capacity in California. Drivers in California face some of the highest gasoline prices in the nation, and a gallon of regular gasoline costs 64 cents higher in California compared to the national average. While critics have pointed to this fact as a sign that the refiners are colluding to limit supply, the companies being investigated counter that “there are many factors that determine the price of gasoline”.
I think this potential collusion relates well to the property of structural balance that was discussed in class. The original three company network is not balanced, as there is a negative relationship between all three companies as they compete with each other within oil refining. This leads to opportunities for collaboration, and over time, the lack of balance in the network can cause relations to change. Collusion results in a positive relationship between all three companies and the network is now balanced. Instead of transitioning to the type of balanced network where two of the three companies have a positive relationship and the third company has a negative relationship with the former two companies, it was interesting to me that a different type of balanced network was achieved, one where there is a positive relationship between all three companies.